Vanguard and State Street Small-Cap ETFs: A Tale of Two Strategies
While State Street’s SPSM has outperformed over the trailing 12 months, Vanguard’s VB retains an edge in liquidity and diversification, according to a recent comparison by The Motley Fool.
A recent analysis by The Motley Fool compares the Vanguard Small-Cap ETF (VB) and the State Street SPDR Portfolio S&P 600 Small Cap ETF (SPSM), highlighting distinct trade-offs for investors navigating the small-cap segment in 2026. Both funds offer low-cost access to U.S. small-capitalisation stocks with identical expense ratios of 0.03%, yet they differ significantly in structure, sector weighting, and recent performance trajectories.
Over the past five years, both ETFs have delivered nearly identical total returns and volatility profiles. However, SPSM has outperformed VB over the trailing 12 months. This recent outperformance stems partly from SPSM’s methodology, which tracks the S&P SmallCap 600 index and applies specific profitability criteria, whereas VB tracks a broader small-cap index designed for wide market exposure.
The most striking difference lies in scale and diversification. VB manages $188 billion in net assets across 1,307 holdings, providing substantial liquidity and broad diversification. In contrast, SPSM holds 608 companies and manages approximately $17 billion in assets. While both funds avoid having technology as their largest sector, their primary exposures differ: VB is led by industrials at 20.00%, while SPSM is weighted towards financial services at 17.00%.
Income-focused investors may find a slight advantage in SPSM, which offers a dividend yield of 1.40% ($0.79 per share) compared to VB’s 1.20% ($3.61 per share). This 0.20 percentage point yield advantage comes despite VB’s significantly higher absolute payout per share, reflecting the lower share price of SPSM. VB’s largest holdings include Credo Technology Group Holding Ltd, Jabil Inc, and Revolution Medicines Inc, while SPSM’s top positions feature Molina Healthcare Inc, Brightspring Health Services, and Viasat Inc.
The Motley Fool’s analysis suggests that while SPSM’s recent one-year return is superior, VB’s superior liquidity and diversification provide stronger structural checks for long-term investors. The report notes that VB was not included in The Motley Fool’s current list of 10 best stocks, a list that has historically included high-growth names such as Netflix and Nvidia.
