Top 3 Vanguard Small-Cap ETFs to Consider for Your Portfolio

Unveiling Small-Cap Vanguard ETFs

In a constantly shifting market landscape, investors often seek effective ways to diversify their portfolios and manage risk. One growing segment they've been turning to is small-cap stocks. These smaller companies have the potential to thrive as the market progresses and show signs of recovery from previous downturns. Today, we will highlight three Vanguard small-cap ETFs that are expected to shine brightly in the coming months.

Why Small-Cap ETFs are Attractive

The appeal of small-cap ETFs lies in their potential for high growth during market recoveries. As larger companies often dominate headlines, small caps tend to be under the radar but are well-positioned for a sharp rebound. Analysts suggest that picking small-cap ETFs now could yield significant returns over the next year and beyond.

1. Vanguard Russell 2000 Growth ETF

First on our list is the Vanguard Russell 2000 Growth ETF (NASDAQ: VTWG). Wall Street analysts predict a 32% upside with an average price target of $253 per share, making it an appealing option for growth-focused investors. With a diverse portfolio encompassing over 1,132 small-cap growth stocks, it balances risk across various sectors, including healthcare, industrials, and technology. With its exceptional five-year annualized return of 8.4%, this ETF has proven its resilience.

Performance Highlights

Currently, the Vanguard Russell 2000 Growth ETF has seen a year-to-date rise of about 5% and an impressive 18% return over the past year. This sustained growth is bolstered by a low expense ratio of merely 0.15%. For those looking to engage in small-cap growth, this ETF presents a solid investment option.

2. Vanguard Russell 2000 ETF

The next noteworthy ETF is the Vanguard Russell 2000 ETF (NASDAQ: VTWO). This ETF provides broad exposure by investing in the entire Russell 2000 index, featuring 2,006 stocks across various industries. It presents a median price target of $107 per share, signifying a potential 28% increase in the following year.

Diversification Benefits

By offering diversification with 19% of its assets in industrials, 17% in financials, and 11% in technology, this ETF ensures that investors tap into an extensive array of sectors. Currently, it has produced a YTD return of approximately 3% and an annual return of 18.4%, with a commendable five-year annualized return of 9.7%.

3. Vanguard Russell 2000 Value ETF

Wrapping up our list is the Vanguard Russell 2000 Value ETF (NASDAQ: VTWV). Designed for those with a value-oriented investment strategy, it presents a targeted 25% increase prediction for the next year. Holding roughly 1,450 stocks, this ETF primarily invests in financials, consumer discretionary, and industrial sectors.

Investment Strategy

With major holdings including South State Corp, Meritage Homes, and Taylor Morrison Home, this ETF provides robust options in the housing market and banking sector. Over the past year, its performance showed a positive return of 19%, while offering a solid five-year annualized return of 10.4%.

Looking Ahead: A Bright Future

These three Vanguard ETFs have been identified as the top choices for investors eager to tap into the potential of small-cap stocks. With small-caps poised for growth, deciding between them can be quite the challenge. The strategic focus on growth and value presents an opportunity for well-rounded exposure.

If you're considering your options, it would be prudent to explore the Vanguard Russell 2000 Growth and the Russell 2000 Value ETFs to maximize your diversification and potential returns.

Frequently Asked Questions

What are small-cap ETFs?

Small-cap ETFs are investment funds that focus on companies with smaller market capitalizations, which can offer significant growth potential compared to larger companies.

Why invest in Vanguard small-cap ETFs?

Vanguard small-cap ETFs provide diversified exposure to the growth potential of smaller companies, which can outperform larger firms in certain market conditions.

What are the expense ratios of these ETFs?

The Vanguard Russell 2000 Growth ETF and the Vanguard Russell 2000 Value ETF both have an expense ratio of 0.15%, while the Vanguard Russell 2000 ETF has a lower ratio of 0.10%.

How have these ETFs performed recently?

Recently, the Vanguard Russell 2000 Growth ETF has a YTD return of 5%, the Vanguard Russell 2000 ETF about 3%, and the Vanguard Russell 2000 Value ETF approximately 2%.

Which Vanguard ETF is recommended for beginners?

For beginners, the Vanguard Russell 2000 ETF may be the best option due to its broad diversification across multiple small-cap stocks.

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