Vanguard’s VBK vs. State Street’s SLYG

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Both the State Street SPDR S&P 600 Small Cap Growth ETF (SLYG) and the Vanguard Small-Cap Growth ETF (VBK) provide good exposure to smaller growth companies, so choosing one to invest in comes down to a handful of key differences.

Because VBK has a greater emphasis on technology stocks, it exhibits higher volatility. This can be seen in its bigger beta and max drawdown compared to SLYG. However, the fund sports a much lower expense ratio, which keeps more money in your pocket. Moreover, its far larger assets under management provide the fund with greater liquidity for investors.

SLYG’s smaller exposure to the tech industry contributed to its lower one-year return compared to VBK due to the sector’s rapid growth from the rise of artificial intelligence. However, this means SLYG is not as exposed to the higher volatility inherent in the technology market. Moreover, stocks such as Arrowhead Pharmaceuticals have seen substantial gains over the past year, so SLYG can still deliver strong results without as much invested in tech companies.

In choosing between these two ETFs, SLYG’s major downsides are its smaller AUM and higher expense ratio. For investors who care about liquidity and cost, VBK would be the superior ETF. For those who want lower volatility, SLYG is the better choice.

ETF: Exchange-traded fund that holds a basket of securities and trades like a stock.Expense ratio: Annual fund fee, expressed as a percentage of assets, deducted from returns.Assets under management (AUM): Total market value of all assets managed by a fund.Small-cap: Companies with relatively small stock market values, typically a few hundred million to several billion dollars.Growth stocks: Companies expected to grow earnings or revenue faster than the overall market.Benchmark: A standard index used to measure a fund’s performance and guide its holdings.Dividend yield: Annual dividends per share divided by share price, showing income return percentage.Total return: Investment gain including price changes plus dividends, assuming dividends are reinvested.Beta: Measure of a security’s volatility relative to the overall market, often the S&P 500.Max drawdown: Largest peak-to-trough decline in value over a specific period.Sector allocation: How a fund’s investments are distributed across different industries or sectors.Diversification: Spreading investments across many securities to reduce the impact of any single holding.

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Robert Izquierdo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Comfort Systems USA and Vanguard Index Funds – Vanguard Small-Cap Growth ETF. The Motley Fool has a disclosure policy.

Better Small-Cap Growth ETF: Vanguard’s VBK vs. State Street’s SLYG was originally published by The Motley Fool