Vanguard (VB) vs. State Street (SPSM) in a Small-Cap ETF Showdown
2026-10-07 20:12
•Josh Kohn-Lindquist •The Motley Fool
••• •• Axe Cap view
Small-Cap ETFs: SPSM Edges VB on Rand-Linked Growth
Between Vanguard’s VB and State Street’s SPSM, the latter’s focused picks and dividend edge appeal more to rand-linked investors seeking steadier small-cap exposure.
South African investors looking to small-cap exposure can learn from the US small-cap ETF race between Vanguard’s VB and State Street’s SPSM. Both charge ultra-low fees, but SPSM’s tighter portfolio of around 600 profitable companies has outperformed VB’s broader nearly 1,400 holding basket over the last year. The higher dividend yield and consistent dividend growth SPSM offers matter because in rand terms, reliable income cushions volatility amid rand swings. VB’s broader diversification reduces company-specific risk but comes with more earnings uncertainty, which could mean more surprises if the rand jitters. For JSE investors, small, well-chosen units often fare better than broad baskets, particularly in sectors like mid-tier banks or retailers that can’t afford volatility. Yet, if the US market weakens or rand stays stable, VB’s diversity could prove its worth. this is just our opinion and not financial advice
Prefer SPSM for targeted, income-supporting exposure mimicking what South African investors need in small caps; avoid VB unless you want diversification over yield and steadiness.
- SPSM
- VB
- USD/ZAR
- US small-cap market downturn
- Rand stabilizes reducing income hedge value
6/10
Vanguard Morningstar Small-Cap ETF (VB) and State Street SPDR Portfolio S&P 600 Small Cap ETF (SPSM) are compared as low-cost small-cap investment options. Both charge identical 0.03% expense ratios, but VB offers broader diversification with 1,357 holdings while SPSM focuses on 607 concentrated picks. SPSM delivered higher 1-year returns (17.3% vs 14.3%) and a higher dividend yield (1.56% vs 1.28%), with the analyst slightly favoring SPSM for its profitability filter and stronger dividend growth.
Our take is based on reporting first published by The Motley Fool.