The best choices among small value Exchange Traded Funds (ETFs) include offerings from Vanguard and iShares. There is also an option from Guggenheim, which isnt bad.

Whatever your total allocation to domestic small cap stocks, allocate 60 to 75 percent of that amount to small value. But no more than that, please. If the value premium disappears or becomes a value discount, you dont want to be left holding the bag.

Even if small value continues to outperform, having both small value and small growth (along with their bigger cousins, all of which tend to rise and fall in different cycles) will help smooth out some of the inevitable volatility of holding stocks.

Vanguard Small Cap Value ETF (VBR)

Indexed to: MSCI U.S. Small Cap Value Index (about 1,000 small value domestic companies)

Expense ratio: 0.23 percent

Average cap size: $1.8 billion

P/E ratio: 19.1

Top five holdings: American Capital Agency, Camden Property Trust, Essex Property Trust, BE Aerospace, Corn Products International

Low cost, wide diversification, tax efficiency beyond compare, and a very definite value bias whats not to like? The Vanguard Small Cap Value ETF offers an excellent way to tap into this asset class. If you hold this fund at Vanguard, you get a bonus: You can trade with no commission.

iShares Morningstar Small Value Index (JKL)

Indexed to: Morningstars Small Value Index (about 230 companies of modest size and modest stock price)

Expense ratio: 0.30 percent

Average cap size: $1.9 billion

P/E ratio: 14.1

Top five holdings: Rock-Tenn Company, Temple-Inland, GenOn Energy, Ryder System, Complete Production Services

The only complaint with the Morningstar indexes is that they tend to be a bit too concentrated, at least in the large cap arena where a company like Exxon Mobil can hold too much sway.

In the Morningstar small cap indexes, that isnt a problem. The largest holding here, Rock-Tenn Company, gets only a 1.24 percent allocation, which is fine and dandy. The expense ratio, too, is acceptable although higher than some others in this category.

Morningstar promises no crossover between growth and value. If you own this ETF along with the iShares Morningstar Small Growth Index, you should get pleasantly modest correlation. (In lay terms, if one fund gets slammed, the other may not.)

iShares S&P Small Cap 600 Value Index (IJS)

Indexed to: 457 of the S&P SmallCap 600 Value Index

Expense ratio: 0.25 percent

Average cap size: $1.2 billion

P/E ratio: 22.4

Top five holdings: World Fuel Services, ProAssurance Corp. Teledyne Technologies, New Jersey Resources, Moog-Inc.Class A

S&P indexes are a bit too subjective. Nonetheless, this funds price is reasonable, and theres no reason to entirely snub this iShares offering. Oh, this fund also trades commission-free on the Fidelity platform.

Guggenheim S&P 600 Small Cap Pure Value (RZV)

Indexed to: S&P SmallCap Pure Value Index (approximately 150 of the most valuey and small of the S&P 600 companies)

Expense ratio. 0.35

Average cap size: $350 million

P/E ratio: 15.8

Top five holdings: Agilysys, Red Robin Gourmet Burgers, Ciber Inc. Lithia Motors, Audiovox Corp.

The price is higher than others in this category, and the promise of “purity” is a bit murky, especially if that quest for purity leads to high turnover, which blows the tax efficiency. Guggenheim also seems to cater mostly to traders rather than buy-and-hold investors. Traders usually trade themselves into hamburger-eating misery.

In addition, although the low P/E ratio is tantalizing, the smaller-than-small cap size can be of concern. When cap size gets too small (and small caps start looking like micro caps), liquidity becomes an issue, and index funds can sometimes get hurt.

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