VB captures the entire U.S. small-cap universe — roughly 1,400 companies with market caps between $300 million and $10 billion. This is the boring-but-effective way to own small caps, holding everything from profitable regional banks to speculative biotech firms.
How It Works
Tracks the CRSP US Small Cap Index, which includes the bottom 2-15% of U.S. stocks by market cap. Market-cap weighted, so larger small caps dominate — the top 10% of holdings represent about 15% of the fund. Rebalances quarterly, with annual reconstitution that promotes mid-cap graduates and demotes fallen angels from larger indices.
Key Features
- Owns 1,400+ stocks vs 600-800 in most small-cap funds — true total market exposure
- Rock-bottom expenses beat 99% of active small-cap managers before they even start
- More diversified than Russell 2000 ETFs, with less concentration in unprofitable companies
Risks
- Small caps can underperform large caps for a decade — they did from 2011-2020
- Higher volatility means 40-50% drawdowns happen; this isn't unusual, it's expected
- About 25% of holdings are unprofitable companies that could go to zero in a recession
Who Should Own This
Best for investors who want small-cap exposure without picking winners — you get the next Amazon along with 1,399 also-rans. Works as a 5-15% portfolio position for those believing small caps outperform over 20+ year periods. Not for anyone who'll panic when it lags the S&P 500 for multiple years straight.