FAQ small cap funds addresses the most Frequently Asked Questions (FAQ) regarding Vanguard small cap funds.

How many small cap funds does Vanguard provide?

FTSE All World ex. U.S. Small Cap (International) Index VSFVX

S&P Small Cap Value 600 ETF VIOV

What percentage of the total stock market do small caps represent?

About 10% small caps would equal the weighting of the total stock market. International small cap would also require about 10% to complete the FTSE All World ex. U. S. index. Note that whereas the Vanguard U. S. Total stock market and Total International index funds contain the market weight in small caps, the FTSE Index, holding large and mid cap stocks, does not.

Are small cap funds necessary in my portfolio?

If you desire to hold small cap allocations at market capitalization weightings you can hold a US Total Market Index fund and meet your allocation desires without adding a small cap fund. However, if your employer provided retirement plan provides you with an S&P 500 index fund and no other low cost options you may wish to add a small cap fund in your taxable account or personal retirement plan in order to mirror the market. (See Approximating total stock market for guidance).

You would also want to add a small cap fund to your portfolio if you desire to tilt your portfolio asset allocation towards higher small cap and/or value weightings than those provided by market cap weighting.

Currently, the Vanguard Total International index fund is the only Vanguard international index fund allocating market weights to international small cap stocks. If you hold any of the other Vanguard international index funds, you might want to add a small cap international index fund to your portfolio. (See Vanguard FTSE All-World ex-US Small-Cap Index Fund which suggests holding this fund in a 1:9 ratio with the FTSE-All-World ex-US index for those seeking market cap weighting. The combination of these two funds is a sensible choice for investors seeking total market weighting as the funds track exactly complementary indexes. Additional international small cap options are available at International small cap ).

What are the expected returns of the different funds?

According to 30 year return estimates from William Bernstein and Rick Ferri small cap stocks can be expected to provide the following returns:

sources: — Portfolios Solutions LLC (2006). Reprinted with permission from Rick Ferri. CEO, Portfolio Solutions [1] and William Bernstein The Four Pillars of Investing [2]