VTV vs VBR: A Comprehensive Comparison

If you’re looking to invest in value ETFs, then you’ve likely come across VTV vs VBR.

Both are popular choices for investors looking to gain exposure to value stocks, but which one is right for you?

In this article, we’ll take a closer look at VTV vs VBR, comparing the two ETFs across a range of metrics to help you make an informed decision.

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First, it’s important to understand what ETFs are and how they fit into a value investing strategy. ETFs, or exchange-traded funds, are a type of investment vehicle that allow investors to buy and sell shares in a fund that holds a diversified portfolio of assets. Value investing, on the other hand, is a strategy that involves buying stocks that are undervalued by the market in the hopes that they will eventually rise in price. Value ETFs are ETFs that focus on value stocks, making them a popular choice for investors looking to implement a value investing strategy.

Now that we have a basic understanding of ETFs and value investing, let’s dive into the specifics of VTV vs VBR. We’ll compare the two ETFs across a range of metrics, including expense ratio, holdings, and performance, to help you determine which one is the better choice for your investment portfolio.

Understanding ETFs and Value Investing VTV vs VBR

Basics of ETFs

ETFs, or exchange-traded funds, are a type of investment fund that is traded on stock exchanges, similar to stocks. ETFs are designed to track the performance of a specific index, such as the S&P 500, and provide investors with exposure to a diversified portfolio of stocks. ETFs are known for their low fees, tax efficiency, and ease of trading.

ETFs are a popular choice for investors who want to gain exposure to a particular market or sector without having to buy individual stocks. They are also a good option for investors who want to diversify their portfolio and reduce their risk.

Principles of Value Investing

Value investing is an investment strategy that involves buying stocks that are undervalued by the market. The goal of value investing is to find stocks that are trading at a discount to their intrinsic value, and hold them until the market recognizes their true value.

Value investing is based on the principle that the market is not always efficient, and that stocks can become mispriced due to a variety of factors, such as market sentiment, economic conditions, or company-specific events. Value investors look for companies that have strong fundamentals, such as a low price-to-earnings ratio, high dividend yield, or a strong balance sheet.

ETFs and Value Investing

Value ETFs are a type of ETF that invests in stocks that are undervalued by the market. Value ETFs typically hold stocks with low price-to-earnings ratios, high dividend yields, and strong fundamentals. Value ETFs are a good option for investors who want to gain exposure to value stocks without having to buy individual stocks.

VTV and VBR are two popular value ETFs that track the performance of different market caps. VTV tracks large-cap value stocks, while VBR tracks small-cap value stocks. Both ETFs have low expense ratios and provide investors with exposure to a diversified portfolio of value stocks.

When investing in value ETFs, it is important to remember that value stocks can underperform the market for extended periods of time. Value investing requires patience and a long-term perspective. It is also important to conduct thorough research and analysis before investing in any ETF or stock.

In summary, ETFs are a popular investment vehicle that provide investors with exposure to a diversified portfolio of stocks. Value investing is a strategy that involves buying undervalued stocks with strong fundamentals. Value ETFs are a good option for investors who want to gain exposure to value stocks without having to buy individual stocks.

Comparing VTV vs VBR

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If you’re looking to invest in value ETFs, two popular options are the Vanguard Value ETF (VTV) and the Vanguard Small-Cap Value ETF (VBR). Here’s a breakdown of the similarities and differences between these two funds.

Vanguard Value ETF (VTV)

The Vanguard Value ETF (VTV) is a large-cap value ETF that seeks to track the performance of the CRSP US Large Cap Value Index. This index includes large-cap US stocks that are considered undervalued based on fundamental measures such as price-to-earnings and price-to-book ratios.

Some of the key features of VTV include:

  • Holdings: As of December 2023, VTV holds 343 stocks, with its top holdings including Berkshire Hathaway, Johnson & Johnson, and JPMorgan Chase.
  • Performance: Over the past 10 years, VTV has provided 1.16% higher returns than VBR, according to MoneyMainst.
  • Market Cap: VTV has a market cap of over $200 billion, making it one of the largest value ETFs available.

Vanguard Small-Cap Value ETF (VBR)

The Vanguard Small-Cap Value ETF (VBR) is a small-cap value ETF that seeks to track the performance of the CRSP US Small Cap Value Index. This index includes small-cap US stocks that are considered undervalued based on fundamental measures such as price-to-earnings and price-to-book ratios.

Some of the key features of VBR include:

  • Holdings: As of December 2023, VBR holds 1,017 stocks, with its top holdings including Builders FirstSource, Amedisys, and First Financial Bankshares.
  • Performance: Over the past 10 years, VBR has provided higher returns than VTV, according to MoneyMainst.
  • Market Cap: VBR has a market cap of around $30 billion, making it a smaller fund than VTV.

In summary, VTV is a large-cap value ETF that provides exposure to undervalued large-cap US stocks, while VBR is a small-cap value ETF that provides exposure to undervalued small-cap US stocks. Both funds have their own unique features and may be suitable for different investment goals.

Performance Metrics and Analysis

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Historical Returns

When comparing VTV and VBR, it is important to consider their historical returns. According to Seeking Alpha, VTV invests based on the CRSP US Large Cap Value Index, while VBR invests based on the CRSP US Small Cap Value Index. Over the past decade, VTV yielded on average 1.16% higher per year than VBR (11.90% vs 10.74%). However, past performance is not a guarantee of future results.

Risk and Volatility Metrics

Another important aspect of ETF analysis is risk and volatility metrics. VBR has a higher beta than VTV, which means it is more volatile than VTV. According to AskFinny, VBR’s 3-year return is 15.81%, which is higher than the 3-year return of the benchmark index (S&P 500 TR USD), 10.12%. VBR also has a lower Sharpe ratio than VTV, indicating that it has lower risk-adjusted returns.

Dividend Analysis

Dividend yield is an important factor to consider when comparing VTV and VBR. According to Money Main St., VBR has a lower dividend yield than VTV (2.30% vs 2.64%). However, VBR has a higher dividend growth rate than VTV over the past five years (7.92% vs 6.25%). It is important to note that dividend growth rates are not guaranteed to continue in the future.

Overall, when comparing VTV and VBR, it is important to consider their historical returns, risk and volatility metrics, and dividend analysis. While VTV has a higher dividend yield and lower volatility, VBR has a higher dividend growth rate and higher returns. It is important to evaluate your investment goals and risk tolerance before making a decision between these two ETFs.

Investment Strategies and Considerations

When comparing VTV and VBR, it’s important to consider your investment strategy and goals. Both ETFs provide exposure to value stocks in the US market, but they have some key differences that may make one more suitable for your portfolio than the other.

Growth vs. Value

One of the main differences between VTV and VBR is their focus on growth versus value stocks. VTV is designed to track the performance of large-cap value stocks, while VBR focuses on small-cap value stocks. Large-cap stocks tend to be more established companies with a proven track record, while small-cap stocks are often younger companies with more growth potential.

Sector Weighting and Diversification

Another important consideration when comparing VTV and VBR is their sector weighting and diversification. VBR has a higher exposure to sectors such as Industrials and Real Estate, while VTV has a higher exposure to Technology. It’s important to consider how these sector weightings align with your investment goals and risk tolerance.

Expense Ratio and Fees

Finally, it’s important to consider the expense ratio and fees associated with each ETF. VTV has a lower expense ratio than VBR, which means it may be a more cost-effective option for investors. However, it’s important to consider other fees associated with each ETF, such as trading fees and management fees.

Overall, when deciding between VTV and VBR, it’s important to consider your investment strategy, risk tolerance, and goals. Both ETFs can provide exposure to value stocks in the US market, but they have some key differences that may make one more suitable for your portfolio than the other.

Market Trends and Economic Factors

When comparing VTV and VBR, it is important to consider the current market trends and economic factors that can impact the performance of these ETFs. In this section, we will discuss the influence of market cycles and the impact of economic indicators on VTV and VBR.

Influence of Market Cycles

The stock market is cyclical and goes through periods of growth and decline. Understanding the current market cycle can help you make informed investment decisions. VTV and VBR are both value ETFs that invest in companies with low valuations relative to their earnings growth rate. During a market downturn, value stocks tend to outperform growth stocks. This is because investors become more risk-averse and seek out companies with strong fundamentals and stable earnings.

On the other hand, during a market upswing, growth stocks tend to outperform value stocks. This is because investors are more willing to take on risk and are attracted to companies with high growth potential. Therefore, when deciding between VTV and VBR, you should consider the current market cycle and your risk tolerance.

Impact of Economic Indicators

Economic indicators such as GDP growth, inflation, and interest rates can have a significant impact on the stock market. When the economy is growing and inflation is under control, companies tend to perform well, and the stock market tends to rise. However, when the economy is in a recession or inflation is high, companies may struggle, and the stock market may decline.

When comparing VTV and VBR, it is important to consider the market capitalizations of the companies in each ETF. VTV invests in large-cap value stocks, while VBR invests in small-cap value stocks. During periods of economic growth, large-cap stocks may perform better, while small-cap stocks may perform better during periods of economic decline.

In summary, when deciding between VTV and VBR, it is important to consider the current market cycle and economic indicators. Both ETFs have different market capitalizations and may perform differently depending on the economic environment.

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