Tony Dong
6 min read
Quick Read
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VTV has returned 18.50% year to date versus 12.31% for SPY, providing large-cap value exposure at approximately 20.4 times earnings and a low 0.03% expense ratio.
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VB provides broad exposure to more than 1,000 smaller U.S. companies and has returned 15.49% this year, offering a low-cost way to diversify away from mega-cap market leadership.
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VBR combines the size and value factors and trades at just 17 times earnings. Its cheaper valuation comes with weaker earnings growth and profitability, but has still outperformed this year at 16.23%.
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Year to date through Sept. 1, 2026, the SPDR S&P 500 ETF Trust (SPY) has returned 12.31% on a cumulative total return basis. That’s a perfectly respectable result, but this year the S&P 500 has been getting lapped by several parts of the market investors spent much of the previous decade ignoring, including large-cap value, smaller companies, and small-cap value stocks.
These factor tilts haven’t exactly been popular. For much of the past decade, mega-cap growth dominated as technology companies, particularly the Magnificent Seven, grew earnings rapidly and commanded increasingly large weights in market-cap-weighted indexes. Investors who diversified into cheaper stocks or smaller companies often had to endure years of relative underperformance.
The dynamic has shifted somewhat in 2026. Concerns about the scale of AI capital expenditures, the depreciation expense associated with enormous data center investments, and whether all that spending will ultimately generate adequate returns have helped broaden market leadership. Meanwhile, cheaper value stocks and smaller companies have started catching up.
For aspiring factor investors, I think there are two lessons here. First, size your allocation at a level you can actually stick with. Factors can underperform for years, so I’d rather see someone start with a modest allocation and scale up over time than jump in aggressively after a strong year and panic-sell during the next period of underperformance.
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