The Vanguard S&P Small-Cap 600 Index Fund ETF (NYSEARCA:VIOO) is a popular exchange-traded fund that enables U.S. investors to gain direct access to small-cap stocks in the United States. While it is less well-followed, at
VIOO: Likely To Outperform In The Medium Term, But Not Cheap
Summary
- VIOO is an interesting alternative to funds such as VOO, with a strategy that focuses on investing in small caps.
- VIOO seeks to replicate its benchmark, the S&P Small-Cap 600 Index.
- Over time, one can expect to collect an additional risk premium for holding small caps. However, the level of outperformance is likely to depend on when one enters VIOO.
- I believe VIOO is probably going to continue to outperform (since Q2 2020); however, as the business cycle matures, the level of outperformance is probably going to wind down.
- Since VIOO is more volatile, and given the fund's sector exposures, I maintain a neutral stance in spite of this general expectation.
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