13 Best Small Cap Value ETFs and My 3 Picks for 2024

Small cap value stocks have outperformed every other segment of the market historically. Here we’ll review the 13 best small cap value ETFs. Stick around 'til the end when I give my 3 specific picks for U.S., ex-US Developed Markets, and Emerging Markets small cap value stocks respectively.
// TIMESTAMPS:
00:00 - Intro - Why Small Cap Value Stocks?
01:31 - IJS
01:52 - SLYV
02:15 - VIOV
02:45 - AVUV
03:56 - DFSV
04:22 - IWN
05:18 - VTWV
05:33 - VBR
06:08 - ISCV
06:30 - DLS
07:28 - AVDV
08:02 - DGS
08:37 - AVES
09:20 - Conclusion & Outro
// SUMMARY:
So why Small Cap Value stocks?
Small-cap value stocks have beaten every other style and cap size of stocks historically due to what we think are independent sources of risk. These are known as the Size premium and the Value premium, two of the Fama-French risk factor premia that explain the differences in returns between diversified portfolios.
Here are some more impressive stats illustrating the glamour of small value: From 1928 through 2016, the S&P 500 index had a CAGR of 9.7%, while small-cap value stocks delivered 13.5%. Looking at 40-year periods since 1928, the average return of the S&P 500 was 10.9%, compared to 16.2% for small-cap value stocks.
Unfortunately the Size and Value factors have suffered in recent years, lagging the market. I don’t employ or advise market timing, but AQR maintains that Value is still basically the cheapest it’s ever been right now, suggesting that now may be the worst time to give up on the factor, and that it’s due for a comeback. 2021 and 2022 were actually great years for small value, relatively speaking, so that comeback may indeed be happening. Fingers crossed.
This video discusses these 13 small cap value ETFs:
IJS - iShares S&P SmallCap 600 Value ETF
SLYV - SPDR S&P 600 Small Cap Value ETF
VIOV - Vanguard S&P Small-Cap 600 Value ETF
AVUV - Avantis U.S. Small Cap Value ETF
DFSV - Dimensional US Small Cap Value ETF
IWN - iShares Russell 2000 Value ETF
VTWV - Vanguard Russell 2000 Value ETF
VBR - Vanguard Small-Cap Value ETF
ISCV - iShares Morningstar Small-Cap Value ETF
DLS - WisdomTree International SmallCap Dividend Fund
AVDV - Avantis International Small Cap Value ETF
DGS - WisdomTree Emerging Markets SmallCap Dividend Fund
AVES - Avantis Emerging Markets Value ETF
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#smallcapvalue #smallcapstocks #smallcapfunds
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[@OptimizedPortfolio]

Do you own any small cap value ETFs or are you planning on buying any?

[@Kep19901]

I'm doing the vanguard etfs from Paul merriman ubh 70%us/30%int. Not sure if I should switch to the avantis funds, however I do like paying the lowest fees with all vanguard funds.

[@OptimizedPortfolio]

@@Kep19901 Thanks for sharing, Keith!

[@xaldath4265]

For my own portfolio, I switched out VBR for AVUV since they actually tilt toward the factors I wanted with no regrets so far. In the case of VTI, I left that alone since "the whole US market" was the intent behind the fund and only a cheaper expense ratio fund would be more appealing, but even then I would only switch as a tax loss harvesting measure since 0.03% is almost free as it is.

[@xaldath4265]

I also use AVDV for my international small cap value with no regrets, but it didn't replace a Vanguard fund for me, so I can't really speak on a comparison. More research and consideration will be given to DGS/AVES since I don't currently target emerging small cap value and instead have been using AVEM for the EM market. Probably good enough, but always fun to see if optimizing a *little* more can help.

[@OptimizedPortfolio]

@@xaldath4265 Makes sense.

[@nicholasfelder7829]

Great videos as always, I appreciate the insight that you bring.

[@OptimizedPortfolio]

Thanks, Nicholas! :)

[@christopherriccobono1419]

Great information! Love your Avantis picks. I hold them too.

[@OptimizedPortfolio]

Thanks, Christopher!

[@lemonLime1984]

This is such great info. Love your channel.

[@OptimizedPortfolio]

Thanks so much!

[@Seoulsearch616]

Thanks very much for this list. I've had AVUV on my watchlist for a while, but it was great to learn about other options as well.

[@OptimizedPortfolio]

Thanks for watching!

[@stingray1381]

Wonderful video. I run a version of your Ginger Ale portfolio myself although I did replace DGS with AVES.

[@OptimizedPortfolio]

Thanks Jason!

[@seanharrington4768]

Bro- this is one of your BEST videos. Still watching Paul Merriman videos 👏👏

[@OptimizedPortfolio]

Hah awesome! Thanks!

[@BlueSky-or3is]

Great video! I've owned AVUV and VIOV since April 2022. AVUV is up 9% and VIOV is up 3%.

[@OptimizedPortfolio]

Thanks!

[@TJ-Stackin]

Thank you, brother!

[@OptimizedPortfolio]

:)

[@TJ-Stackin]

@OptimizedPortfolio you think 50% small cap value(US, Emerging, developed)is too high?

[@xaldath4265]

I'll let him speak for himself if he plans to answer, but for me it would depend on age and life circumstance. For a young, financially and emotionally stable individual, I think it's defensible. For someone closer to or in retirement, it's probably better to have a lower volatility portfolio and set those more volatile assets as smaller allocations. If you listen to Merriman, one of the most outspoken proponents of small cap value, he would advise a young investor to go all in on SCV until like 21, then add in the other assets to bring it more into balance over time.

[@kronak8033]

Started watching your videos recently. Thanks for the great information. Also, what % of your overall portfolio do you think should be in international small-cap value?

[@OptimizedPortfolio]

Thanks! That answer is different for everyone - depends on your personal goals, time horizon, risk tolerance, and beliefs and conviction regarding factors.

[@havaneseday]

Great Video John! What do you think of overweighting emerging markets with AVEM and DGS even split? Or full exposure with AVES?

[@OptimizedPortfolio]

Thanks! This post should help you make your decision: www.optimizedportfolio.com/aves/

[@daveschmarder-1950]

Good video. I bought a small amount of AVUV in my Roth portfolio. I've owned DGS and SLYV in the distant past. My total international is less than 4% of my portfolio. I expect to bring that number up a little, using FNDF. Last year I used tax loss harvesting to sell some highly appreciated, long held, moderately expensive, tax inefficient mutual funds. I bought cheaper, more tax efficient ETFs with the proceeds.

[@OptimizedPortfolio]

Awesome, thanks for sharing!

[@jtsandig]

I own AVUV, AVDV, and AVES. I like them so far. I'm just grateful for the active portfolios with fees not too much higher than the passive competition

[@OptimizedPortfolio]

Thanks for sharing, Jordan! Sounds like some great choices.

[@analyticsx3]

I added avuv and avdv to my portfolio. Back testing shows some very nice results compared to the s&p 500.

[@OptimizedPortfolio]

Sounds good!

[@mere_cat]

I came back here and learned something new. DGS was previously unknown to me, but I now notice it is one of Paul Merriman’s “backup” ETFs in his Best in Class list. I’ll be using it for my EM SCV exposure in my Roth moving forward.

[@OptimizedPortfolio]

Love it!

[@ebrahimhabib477]

Revising this video it’s very good and it’s time for small cap stocks

[@OptimizedPortfolio]

🤞

[@DIXIFREELY]

Thanks alot for this video. Seems like investors today sleep on smart value plays. The numbers dont lie. Im thinking of adding RFV to my portfolio. Any thoughts on RFV?

[@OptimizedPortfolio]

That's mid cap value.

[@DIXIFREELY]

@OptimizedPortfolio Yes Im fully aware of that. I decided to go with it as my midcap value allocation. Ty.

[@ebrahimhabib477]

Yes I’m planning to own some of them

[@OptimizedPortfolio]

Thanks for watching!

[@wer78889]

great video! Could you recommend some SCV Ireland-domiciled ETFs? I own USSC, and I'm looking for more options.

[@OptimizedPortfolio]

Not sure about specific options outside the U.S., sorry.

[@wer78889]

@@OptimizedPortfolio thank you for replying! you're great!

[@Howell_Jolly]

Thank you for the video! Why do you prefer AVUV and AVDV over DFSV and DISV?

[@OptimizedPortfolio]

Basically they arrived first and have slightly lower fees for very similar products. But DFSV and DISV would be great choices as well. I compared DFSV and AVUV here: www.optimizedportfolio.com/dfsv-vs-avuv/

[@NATOnova]

Is there a reason why DISV wasnt included? why DFSV over AVUV? For me, its quite the difficult choice deciding between Avantis or Dimensional for SCV, so I split between the two but slightly prefer dimensional.

[@OptimizedPortfolio]

Those weren't even out yet when I originally wrote the blog post for this video, but they're extremely close to the Avantis equivalents. I talked about the comparison here: www.optimizedportfolio.com/dfsv-vs-avuv/

[@dr.lefort1596]

Paul Merrimen lists AVES as EM large cap value. I know he doesn’t include a specific EM small cap etf in his UB&H portfolio, but I’ve heard him mention using AVES and EEMS as on option for factor exposure. How do you compare the combo of those two to your VWO + DGS?

[@OptimizedPortfolio]

kzbin.info/www/bejne/m4i5oWWJoKenmaM

[@jasonhobbs2405]

Thanks for another great video! All my accounts (except for one dedicated to HFEA) are allocated as follows: 35% NTSX 20% AVUV 15% NTSI 15% AVDV 15% NTSE I haven’t added any factor tilts to my emerging markets holdings because I’ve never found a product there that I really love, like I love AVUV and AVDV. Maybe I will in the future.

[@OptimizedPortfolio]

Thanks for sharing, Jason!

[@WW-34]

I would like to own in the future.

[@OptimizedPortfolio]

Thanks for watching!

[@bmorton13]

If I were looking for a small cap value ETF for my Roth IRA would Avuv be a good choice?

[@OptimizedPortfolio]

Hey Brandon, I can't provide personalized advice, so only you can decide if it's right for you. You can read the prospectus to see the full methodology. I personally like AVUV and it works for my goals, strategy, and risk tolerance.

[@Ehhhh123]

Did international small cap value outperform s&p 500 as well over time? Or was it just us small cap value that outperformed?

[@OptimizedPortfolio]

You mean historically? Yes. Int'l SCV premium has actually been larger and more statistically robust than US SCV.

[@qswedasf]

Do you have a UCITS option?

[@OptimizedPortfolio]

Not sure about specific options outside the U.S., sorry.

[@davidgurk3229]

Are there any ESG versions of small cap value ETFs?

[@OptimizedPortfolio]

Good question. Not sure. I'm not really interested in ESG.

[@davidgurk3229]

Thanks for the quick reply. Maybe you could look into it. It could open up a whole new area of interest for you!@@OptimizedPortfolio

[@OptimizedPortfolio]

What I meant is there's no well-defined ESG criteria (it's more of a marketing term at this point), and the evidence I've looked at suggests investors tend to pay more for those specific "tastes," driving up prices and driving down expected returns, thus I'm not interested in ESG fundamentally.

[@RichieBenno]

The wisdom tree products say they track quality and momentum. Also they hold dividend paying companies. Bit annoying as I wanted value tilted and not filtered for dividends.

[@OptimizedPortfolio]

Yes. Naive proxy.

[@UpRiverRafting]

Are these managed funds? How is whether a stock is a value stock determined? It seems like a matter of opinion, not a clear cut number like cap size but I'm probably missing something.

[@OptimizedPortfolio]

What do you mean by "managed?" Different indexes and fund managers utilize different methodologies, but Value can usually simply be summed up as high book-to-market value stocks.

[@UpRiverRafting]

@@OptimizedPortfolio Sorry, I meant are they actively managed? I have to use a taxable account and there should be less turnover for passively managed funds - just trying to figure out what my options are. Thank you for the responses.

[@OptimizedPortfolio]

@@UpRiverRafting Thought that was probably what you meant but wasn't 100% sure. The Avantis funds are technically actively managed but AVUV, for example, has lower turnover than the "passive" indexed VIOV, so that's not always the case.

[@UpRiverRafting]

@@OptimizedPortfolio Is Yahoo Finance as good as anywhere else for fund info? That's where I ended up finding turnover rates for Avantis funds and DGS. Seems like it is only reported for the previous year. Is there anyway of going back further than that? DGS's 45% turnover makes me want to run in the other direction but maybe that's not typical for them? They just need to keep holdings for 1 year so I'm not paying short term gains but at 45% that would be hard to do.

[@OptimizedPortfolio]

@@UpRiverRafting Fund prospectus and quarterly/annual reports would be the most reliable sources.

[@binhvong5297]

Many small value ETFs have high turnovers, ie 50%, so is the yearly tax liability worth it? Or should only invest them in a Roth IRA?

[@OptimizedPortfolio]

Depends on your personal tax circumstances.

[@thberry10]

What are your thoughts on AVEE?

[@OptimizedPortfolio]

Possibly good for Emerging Markets small cap blend, and it tilts value. Still a bit early.

[@kenwen7791]

AVDV through GoTrade (because of Ben Felix 😂)

[@scottames6895]

viov here

[@OptimizedPortfolio]

Thanks for sharing, Scott! I like VIOV.

[@fezesdasilva2728]

SLYV

[@Victor-lo6uq]

Would you recommend AVEE over AVES?

[@Victor-lo6uq]

or even DGS

[@OptimizedPortfolio]

Not sure yet. Going to keep my eye on it. I have some initial thoughts on it here: www.optimizedportfolio.com/avantis-new-etfs-november-2023/

[@OptimizedPortfolio]

@@Victor-lo6uq Previously I commented on AVES vs. DGS here: kzbin.info/www/bejne/m4i5oWWJoKenmaM

[@BlokFinance]

Good info. Always makes sense to listen to others then go investigate

[@OptimizedPortfolio]

Thanks!

[@josh995]

AVUV vs VIOV vs VBR for a small cap etf to add to VOO?

[@OptimizedPortfolio]

You realize that's precisely what I discuss in this video, right?

[@fezesdasilva2728]

SLYV

[@Jay230612]

Why would you buy AVUV when you can VBR at much cheaper rate while both do the same.

[@OptimizedPortfolio]

Already explained that in the video and in this one: kzbin.info/www/bejne/qWS6fXp7rLd5rq8

[@fezesdasilva2728]

SLYV