Vanguard VBK vs Invesco RZG: Which Is the Best Small-Cap ETF for You?

When hunting for the best small-cap etf, two standout contenders emerge: the Vanguard Small-Cap Growth ETF (VBK) and the Invesco S&P SmallCap 600 Pure Growth ETF (RZG). Both target U.S. small-cap growth stocks, yet they chart remarkably different paths in fees, diversification, and sector exposure. If you’re considering small-cap growth exposure but unsure which offers superior value, this breakdown reveals how each stacks up across cost, performance, risk, and portfolio strategy.

Cost Comparison: VBK Significantly Undercuts RZG

The fee structure alone tilts the scales decisively toward Vanguard’s offering. VBK charges just 0.07% annually, while RZG demands 0.35%—a fivefold difference that compounds dramatically over decades. For a $100,000 investment held for 20 years, that gap translates to roughly $7,000 in cumulative savings favoring VBK, assuming similar returns.

Beyond expenses, the asset base tells another story. VBK manages nearly $39.7 billion in assets, while RZG commands only $108.6 million. This disparity matters: larger funds typically enjoy superior liquidity, tighter bid-ask spreads, and more efficient index tracking. VBK’s dividend yield of 0.5% also edges out RZG’s 0.4%, providing a modest income cushion for long-term holders.

Performance & Risk: Nearly Identical Despite Fee Differences

Over trailing one-year periods (as of January 9, 2026), RZG delivered 15.9% returns compared to VBK’s 14.4%—a marginal 1.5-percentage-point advantage. Yet this outperformance came with a cost: RZG’s more concentrated approach introduces greater portfolio risk.

Looking at drawdowns across five years, both funds exhibited near-identical maximum declines around -38%, signaling comparable downside resilience. The growth metric reinforces this parity: $1,000 invested five years prior would have grown to approximately $1,154 in RZG versus $1,145 in VBK—a trivial $9 difference. Neither fund escaped the volatility inherent to small-cap investing, and neither demonstrated meaningful risk-adjusted superiority.

Portfolio Composition: Diversification vs. Concentration

Here lies the fundamental philosophical divide. VBK maintains 579 holdings, casting a wide net across the small-cap universe. Its sector allocation reflects balanced exposure: technology (27%), industrials (21%), and healthcare (18%). Top positions remain modest—Insmed Inc. represents just 1.44% of assets, Comfort Systems USA 1.13%, and SoFi Technologies 1.11%.

RZG takes the opposite tack, concentrating 131 positions around the S&P SmallCap 600 Pure Growth Index with a pronounced healthcare slant (26%), followed by industrials (18%) and financial services (16%). Its largest holdings—ACM Research Inc., PTC Therapeutics Inc., and Progyny Inc.—each occupy materially larger portfolio slices than VBK’s top names, amplifying sector-specific and company-specific risk.

For investors prioritizing stability and long-term wealth accumulation, VBK’s broader diversification dampens idiosyncratic risk—the danger that a single underperformer torpedoes returns. RZG’s concentrated model, conversely, magnifies the impact of both winners and losers within its narrow ecosystem.

The Verdict: Choosing Your Best Small-Cap Growth Vehicle

Selecting between these two best small-cap etf options hinges on your investment philosophy and risk tolerance.

VBK shines for:

• Cost-conscious investors seeking long-term wealth building
• Those valuing deep diversification and reduced single-company risk
• Individuals wanting maximum liquidity and trading flexibility
• Buy-and-hold strategists comfortable with slightly lower recent returns in exchange for structural advantages

RZG appeals to:

• Growth-focused investors comfortable with higher fees and concentration
• Those betting that healthcare innovation will outpace broader small-cap growth
• Traders willing to accept volatility swings for potentially outsized winners
• Investors with sufficient capital and expertise to weather sector-specific downturns

The data suggests VBK represents the best small-cap etf for most retail investors: its expense ratio slashes costs while its massive asset base ensures optimal execution. Yet investors comfortable with RZG’s concentrated approach and elevated fees may justifiably chase its narrower focus on pure-growth and healthcare opportunities. Neither choice guarantees superior returns; the distinction lies in fee efficiency, portfolio structure, and alignment with your long-term investing objectives.