Small-Cap ETFs: Is VB or SPSM the Better Investment?

The Vanguard Small-Cap ETF (NYSEMKT:VB) offers twice as many holdings (1,307) compared to the State Street SPDR Portfolio S&P 600 Small Cap ETF (NYSEMKT:SPSM), both maintaining a 0.03% expense ratio. While SPSM delivered a 33.70% return over the past year, VB's return stood at 25.90%, highlighting how profitability criteria in the S&P SmallCap 600 index may influence total returns. Vanguard's top holdings include Credo Technology Group Holding Ltd (0.54%), Jabil Inc (0.49%), and Revolution Medicines Inc (0.45%), whereas State Street's largest positions are Molina Healthcare Inc (0.69%), Brightspring Health Services (0.61%), and Viasat Inc (0.52%). Both ETFs exhibit beta values around 1.10, with SPSM offering a higher dividend yield (1.40%) versus VB's 1.20%.

■SPSM experienced a 27.90% maximum drawdown over five years, compared to VB's 28.20%.

■A $1,000 investment in SPSM grew to $1,488 over five years, while VB reached $1,486.

■Vanguard's AUM totals $188.2 billion, significantly higher than State Street's $17.1 billion.

■Sector weights: VB emphasizes industrials (20%), technology (18%), and healthcare (13%), while SPSM focuses on financial services (17%), industrials (16%), and technology (16%). The performance divergence underscores how low-cost ETFs compete with large-cap funds, reflecting sectoral shifts and investor risk preferences in small-cap markets.

Captain Rıza Deniz Note: The performance gap between these ETFs signals evolving risk sentiment among industrial and tech investors in supply chains. SPSM's outperformance suggests short-term demand surges are being captured more effectively by smaller firms, while VB's broader exposure appeals to long-term stability seekers. This dynamic mirrors global commodity shocks and inflationary pressures impacting small-cap valuations.