Author Topic: Best Small Cap Value ETF to Place in a Tax Advantaged Account  (Read 1603 times)

xnyjets80x

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Best Small Cap Value ETF to Place in a Tax Advantaged Account
« on: February 20, 2019, 05:32:12 AM »
I am planning on tilting my portfolio towards small cap value and was wondering what the best small cap value etf is to place in a Roth IRA?

I am currently between VBR (0.07% ER), IJS (0.25% ER), and SLYV (0.15% ER).

I know VBR has more mid-cap exposure than the other two but I'm attracted to the lower expense ratio. From reading previous threads, I see a lot of people like the SLYV fund in a tax advantaged IRA as it has performed the best in the past (I know past performance is not the best indicator of future success) and although it has the highest dividends I can avoid taxes on these by placing it in my Roth IRA. I was ultimately thinking of doing 50% VBR and 50% SLYV to balance out the higher expense ratio of SLYV and to gain further exposure to true small cap value that VBR is lacking.

1) I was seeing what other peoples thoughts were overall of these funds and which funds they prefer in a tax advantaged account (ROTH IRA).

2) I was seeing what people thought of my above strategy/mindset in placing 50% on my small value allocation into SLYV and 50% into VBR to balance out the higher expense ratio of SLYV and to tilt more towards small cap value that VBR lack.

Thank you all in advance.

MustacheAndaHalf

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Re: Best Small Cap Value ETF to Place in a Tax Advantaged Account
« Reply #1 on: February 20, 2019, 07:30:59 AM »
It's not just more mid cap exposure, it's that Vanguard Small Cap Value ETF (VBR) has mostly mid-cap stocks.  Look on morningstar, and you'll see it's over 50% mid caps.  It's not really a small cap fund.

If you'll accept a fund with less than half mid-caps in order to save 0.08%/year, would you accept a total stock market ETF like VTI that saves you another 0.03% in annual fees?  Why not?  That same logic applies to the reason you should prefer other small cap value ETFs over VBR.

I'd favor SLYV (0.15% ER) over the other funds.  Since you're concerned about expense ratio but include several S&P 600 small value ETFs, you should also take a look at VIOV (0.20% ER), Vanguard S&P 600 Small Value ETF.
https://investor.vanguard.com/etf/profile/VIOV

Much Fishing to Do

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Re: Best Small Cap Value ETF to Place in a Tax Advantaged Account
« Reply #2 on: February 20, 2019, 07:59:52 AM »
VTWV is the vanguard etf of what I always considered to be the definition of small cap value (the Russell 2000 value).  Its both more small and more value leaning than the VBR.  Its pretty thinly traded for a VG ETF. Its expense is 0.20.

bacchi

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Re: Best Small Cap Value ETF to Place in a Tax Advantaged Account
« Reply #3 on: February 20, 2019, 09:04:18 AM »
https://paulmerriman.com/schwab-tax-deferred-etf-portfolios/

There are other brokerages listed there too. For Schwab, it's SLYV. For Fido, it's IJS. Those are based on commissions so Vanguard is no longer relevant.

flipboard

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Re: Best Small Cap Value ETF to Place in a Tax Advantaged Account
« Reply #4 on: February 20, 2019, 10:51:32 AM »
Over the time period where VIOV/SLYV/IJS have been tracking the same index, SLYV has been the best performer, at least when using the following site:
https://www.etfreplay.com/charts.aspx

Be careful: SLYV changed index in December 2010, so for my comparison I picked the period 3rd Jan '11 until 19th Feb '19 to be safe:
Total returns are:
SLYV: 140.1 %
IJS: 139.1 %
VIOV: 138.9%

If I shorten the period to 3rd Jan '15 until 19th Feb '19, I get 43.4/42.9/43.0 %. That's a lot closer together, but SLYV again leads the pack.

If I choose either the last year, or the last 2 years, they're indistinguishable (either 6.3 or 6.4%, or 16.0 or 16.1%). That suggests they're now similarly good in terms of performance, but given the smaller gains the differences will relatively be smaller and less distinguishable. Given that SLYV does have lower expenses, I'd probably still favour it (assuming free trades - but it's free at Schwab at least).