VBR vs VBK: Which is the Better?
LAST UPDATED: September 28, 2023 | By Conrad Golly
If you’re an investor looking to diversify your portfolio with exchange-traded funds (ETFs), you might be wondering which one is better between VBR vs VBK.
VBR is the Vanguard Small-Cap Value ETF, which invests in small-cap stocks that are considered undervalued by the market. VBK is the Vanguard Small-Cap Growth ETF, which invests in small-cap stocks that are expected to have higher growth potential.
Both ETFs have low expense ratios and offer exposure to the small-cap segment of the financial markets, but they have different investment objectives.
VBR Vs VBK – Overview
As an investor, it’s important to consider your investment goals and risk tolerance when choosing between VBR and VBK. While VBR may offer higher dividend yields and could be a good fit for investors seeking steady income, VBK may be a better choice for those looking for higher growth potential.
When it comes to choosing between VBR and VBK, it’s important to understand the differences between these two funds. In this section, we’ll take a closer look at both funds and compare them based on several key factors.
What’s The Difference?
VBR is a Vanguard Small Value fund, while VBK is a Vanguard Small Growth fund. The main difference between the two funds is the type of stocks they invest in.
VBR invests in small-cap value stocks, which are considered undervalued by the market, while VBK invests in small-cap growth stocks, which are expected to grow at a higher rate than the overall market.
Index
VBR tracks the CRSP US Small Cap Value Index, while VBK tracks the CRSP US Small Cap Growth Index. The former index includes small-cap value stocks, while the latter includes small-cap growth stocks.
Expense Ratio
Both VBR and VBK have the same expense ratio of 0.07%. This means that for every $1,000 you invest in either fund, you’ll pay $0.70 in fees annually.
Issuer
Both VBR and VBK are issued by Vanguard, one of the largest and most well-known providers of index funds and ETFs.
Fund Composition
VBR has a larger number of holdings (1,229) than VBK (670). VBR invests in a mix of large-cap, mid-cap, and small-cap value stocks, while VBK invests in small-cap growth stocks.
Credit Quality
Both VBR and VBK invest primarily in equities, so credit quality is not a major factor in their performance.
Regional Allocation
Both VBR and VBK are focused on the US market, with the majority of their holdings in US-based companies.
Maturity
Neither VBR nor VBK invests in fixed income, money market funds, or short maturity active ETFs. Therefore, maturity is not a factor in their performance.
Overall, when deciding between VBR and VBK, it’s important to consider your investment goals and risk tolerance.
If you’re looking for a fund that invests in undervalued small-cap stocks, VBR may be the better choice. However, if you’re looking for a fund that invests in small-cap growth stocks, VBK may be a better fit for your portfolio.
VBR Vs VBK – Analysis
When it comes to choosing between VBR and VBK, there are a few factors to consider. In this section, we’ll analyze the two ETFs based on their volatility and drawdown.
Volatility
Volatility is a measure of how much the price of an asset fluctuates over time. VBR has a higher volatility than VBK, which means that it is more risky. However, it is important to note that higher volatility can also mean higher potential returns.
Drawdown
Drawdown is the percentage decline from an asset’s peak value to its lowest value. VBK has a higher drawdown than VBR, which means that it has a higher potential for loss.
However, it is important to note that higher drawdown can also mean higher potential returns.
When it comes to financial markets, both VBR and VBK track the small-cap segment of the market. Interest rates can affect both ETFs, but they are not actively managed, so they are less susceptible to interest rate changes.
If you are looking for an actively managed ETF, PIMCO Enhanced Short Maturity (MINT) may be a better option. However, if you are looking for a passive investment, VBR and VBK are both good choices.
In terms of similar funds, VBR and VBK are both small-cap ETFs. However, VBR focuses on small-cap value stocks, while VBK focuses on small-cap growth stocks. It is important to consider your investment goals and risk tolerance when choosing between the two.
VBR Vs VBK – Performance
When it comes to comparing VBR and VBK, performance is one of the most important factors to consider. Here’s a closer look at how these two ETFs have performed over the years.
Annual Returns
One way to compare the performance of VBR and VBK is to look at their annual returns. According to ETF Database, VBR has had an average annual return of 10.11% over the past 10 years, while VBK has had an average annual return of 13.56% over the same period.
However, it’s important to note that past performance is not indicative of future results.
Portfolio Growth
Another way to compare the performance of VBR and VBK is to look at their portfolio growth. VBR is designed to provide exposure to small-cap value stocks, while VBK is designed to provide exposure to small-cap growth stocks. Therefore, the portfolio growth of these ETFs may differ.
According to PortfoliosLab, VBK has had a higher growth rate over the past year, with a portfolio growth of 40.02% compared to VBR’s portfolio growth of 32.36%. However, it’s important to note that this is just a snapshot of their performance and may not be indicative of future results.
VBR may be a better choice for investors who are looking for exposure to small-cap value stocks, while VBK may be a better choice for investors who are looking for exposure to small-cap growth stocks. However, it’s important to do your own research and consider your own investment goals and risk tolerance before making any investment decisions.
It’s also worth noting that both VBR and VBK may be suitable for short-term investments or as part of a fixed-rate portfolio.
Additionally, if you’re looking for current income, you may want to consider JPMorgan Ultra Short Income ETF, which is an ultra-short income ETF that provides exposure to short-term, high-quality fixed income securities.
Bottom Line: VBR Vs VBK
When it comes to choosing between VBR and VBK, the decision ultimately depends on your investment goals and risk tolerance. Here are a few factors to consider:
Investment Objective
VBR is a small-cap value fund, which means it invests in small-cap stocks that are considered undervalued by the market.
VBK is a small-cap growth fund, which invests in small-cap stocks that are expected to grow at a faster rate than the overall market. If you’re looking for long-term growth potential, VBK may be a better option.
However, if you’re more concerned with value and stability, VBR may make more sense.
Risk
Small-cap stocks are generally considered riskier than large-cap stocks, as they are more susceptible to market volatility.
However, small-cap value stocks tend to be less risky than small-cap growth stocks, as they are often more stable and less likely to experience sudden price swings. If you’re concerned about risk, VBR may be a better choice.
Fees
Both VBR and VBK have low expense ratios, with VBR being slightly cheaper at 0.07% compared to VBK’s 0.08%. While the difference may seem small, it can add up over time and impact your overall returns.
Performance
Over the past 10 years, VBR has outperformed VBK in terms of total return. However, past performance is not a guarantee of future results, and it’s important to consider a fund’s performance over a longer period of time.
Additionally, it’s important to compare a fund’s performance to its benchmark index, as well as to other funds in the same category.
Todd Rosenbluth’s Research
According to Todd Rosenbluth, head of ETF and mutual fund research at CFRA, VBR is a better option for investors concerned about a recession, as small-cap value stocks tend to perform well during economic downturns.
However, he notes that VBK may be a better choice for investors looking for exposure to technology and other growth sectors.
Maturity and Holdings
VBR and VBK have different holdings, with VBR holding more financial and industrial stocks, while VBK has a higher allocation to technology and healthcare stocks.
Additionally, VBR has a slightly longer average maturity than VBK, which means it may be more sensitive to changes in interest rates.
Both VBR and VBK have their advantages and disadvantages, and the best choice depends on your investment goals and risk tolerance.
It’s important to do your own research and consider factors such as fees, performance, and holdings before making a decision.
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