2 Discounted Small Cap Index Funds to Buy during Coronavirus Market Dip

Small Caps Down over 40% after Coronavirus

You should jump in now and invest in the Coronavirus market dip in small cap stocks amidst the Coronavirus crash. Small cap stocks are typically stocks that have a market cap total below 2 Billion Dollars. These stocks are notorious for dropping more aggressively at the start of a bear market (like they are now).

However, on the plus side, they are also well known for going up significantly at the start of a Bull market. So as they drop more, they also recover more…

When you buy during a market dip you are taking advantage of stocks at a discount. You could really do some studying and try to find information and detail on these small market stocks and pick single stocks to really try to find a golden ticket and make massive returns on a rebound.

What I am doing however is selecting small cap index funds such as Vanguards small cap value index fund (VSIAX) and Vanguards S&P small cap 600 value index ETF (VIOV).

Both of these funds have taken an absolute beating since the since the start of the Coronavirus dip and are going to go through some rough patches as the economy shakes out over the coming months.

But, when you view this through the long term lens like I do and recommend that you do as well. You see that this is a massive discount that you can take advantage of. You can capture the small cap rebound that is sure to happen at some point whenever that may be in the coming year or years, while buying at a discount.

Another great thing rather than buying single stocks and hoping for bigger return while also realizing much larger boat loads of risk, is to buy an index like these two recommended funds offer. This gives you exposure to the asset class through hundreds of stocks. Lets look a little closer into each stock recommendation above.

Vanguard Small Cap Value Index (VSIAX)

This fund tracks the CRSP US Small Cap Value Index as it’s benchmark index. This fund is somewhat bigger than the other fund mentioned in this article. This fund gives you small cap exposure, but also has some relatively large mid cap stock exposure as well. This stock has a very low fee of 0.15% and this can be helpful over the long run. This stock has had very good returns of the long term and is a great option, like many vanguard index funds.

If you are looking to own more specifically into the small cap value asset class with even smaller companies, you may want to look at the next index.

Vanguard S&P 600 Small Cap Value ETF (VIOV)

This ETF is the same as an index fund, yet it is traded throughout the day on the stock market rather than within a broker holdings like a typical index fund. This fund also experienced a massive drop and is selling at a large discount at this point in time.

As the title shows this follows a different index than the aforementioned Vanguard index fund. This ETF is aimed to mirror the S&P 600 Small Cap index and is tilted towards value companies within that index. This ETF has much smaller company size on average and is therefore much more exposed to the actual small cap value sector.

Again quite low fees offered as an ETF at 0.15% and is traded at a lower entry price with no minimum making it much easier to buy in small swathes rather than committing a large amount of money into it to get started.

This is a smaller overall company size on average so you are able to at a cheap price of entry track the small cap value sector quite well for the long term.

Buy Small Cap during the Coronavirus Market Crash

If you buy either of these funds during the huge Coronavirus market discount you won’t be sorry in a few years. You have to look at this from a long term view, and there may be some bumps in the road in the coming months or years. But small cap value is a great asset class to get some exposure to in your portfolio. And compared to most asset classes based on market capitalization it is on the biggest discount after taking the largest hit during the market crash.

Jump in now… hold… wait… be patient… and you will see the fruits of your labor in the coming years. Enjoy that inevitable small cap stock market rebound. Will it be tomorrow, will it be next year, the year after? I don’t know, and quite frankly no matter what you may hear, no one does. But just buy and hold you won’t be sorry!

If you Enjoyed, or have any questions whatsoever, let me know in the comments!!!

This Post Has 2 Comments

  1. Josh Zorn

    Really great article and great opinion here with small-cap ETFs. Love your work. Please keep it coming!!!

    1. Dr. Zachary

      Thank you Josh! Appreciate your insight… Are you currently involved with any Small Cap exposure? Obviously it’s a great time to invest in many different avenues of the market, but small cap is on such a big discount right now paired with its history of rebounding larger post dip that it is a nice area to scoop up shares right now!

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