Finding Genuine Value in a Crowded ETF Market
In 2019, value investing staged a notable recovery after years of underperformance relative to growth. For investors seeking systematic exposure to undervalued stocks, exchange-traded funds offered a low-cost, diversified path. The best value ETFs of the year were distinguished not just by low prices, but by strict screening criteria, deep liquidity, and a track record of capturing the value premium over full market cycles. Choosing among them required weighing factors like factor purity, sector bias, and trading costs rather than relying on recent headline returns alone.
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How Value ETFs Were Evaluated
A rigorous assessment looked beyond the headline expense ratio. Key dimensions included the underlying index methodology, turnover and embedded trading costs, tracking error, portfolio concentration, and the fund's ability to isolate the value factor without unintended style drift. A fund might advertise a low fee, but if its holdings are dominated by a handful of mega-cap energy or financial names, the diversification benefit erodes. In 2019, the most credible value ETFs used transparent, rules-based screens grounded in metrics such as price-to-book, price-to-earnings, and dividend yield, while avoiding heavy single-stock bets.
Comparison of Leading Value ETFs
| ETF | Expense Ratio | Holdings | Index Tracked | Key Trait |
|---|---|---|---|---|
| Vanguard Value ETF (VTV) | 0.04% | ~320 | CRSP US Large Cap Value Index | Broad large-cap value exposure, deep liquidity |
| iShares Russell 1000 Value ETF (IWD) | 0.19% | ~560 | Russell 1000 Value Index | Mid- and small-cap inclusion beyond mega-caps |
| Schwab U.S. Large-Cap Value ETF (SCHV) | 0.04% | ~100 | Dow Jones U.S. Large-Cap Value Index | Highly concentrated, ultra-low cost |
| SPDR S&P 500 Value ETF (SPVV) | 0.04% | ~150 | S&P 500 Value Index | Pure large-cap value subset of the S&P 500 |
| Invesco S&P 500 Pure Value ETF (RPV) | 0.39% | ~100 | S&P 500 Pure Value Index | Strict value screen, fewer holdings |
Trade-Offs Among the Top Picks
The Vanguard Value ETF offered the best combination of low cost and broad diversification, making it a core holding for many portfolios. Its larger number of holdings reduced single-stock risk, though it included names where value was marginal. The Schwab fund delivered even lower costs but with a tighter portfolio, meaning sector and stock-level swings could have an outsized impact. The iShares Russell 1000 Value ETF bridged the gap by adding mid- and small-cap value names, which historically offered higher premiums but also greater volatility. The Pure Value ETF from Invesco applied the strictest screens, which often excluded familiar household names, resulting in a more concentrated and sometimes more volatile fund.
What Made 2019 a Relevant Year for Value
After a decade where growth stocks dominated, 2019 saw value begin to reclaim ground. The reopening of the value premium was driven by rising interest rates late in the cycle, a rotation toward economically sensitive sectors, and the re-rating of financials and energy stocks that had been out of favor. For investors entering 2019, value ETFs provided an inexpensive way to position for this reversion. The best funds avoided the temptation to chase momentum and instead adhered to disciplined, bottom-up value metrics. This patience was rewarded as the year progressed and relative performance shifted back toward value-oriented strategies.
Risks and Practical Considerations
Value ETFs are not immune to prolonged drawdowns. In a sustained low-rate environment or a market dominated by disruptive growth, value can remain in a slump for years. Investors also needed to watch for tracking error and the impact of corporate actions such as mergers and spinoffs on fund composition. Tax efficiency varied; funds with higher turnover generated more taxable distributions. A practical approach was to pair a core value ETF with a broader market fund for balance, rather than expecting the value sleeve alone to drive returns.
Building a Portfolio with Value ETFs
The most effective use of a value ETF in 2019 was as a deliberate tilt within a diversified portfolio, not as a complete equity allocation. A core-satellite framework worked well: a broad market ETF as the base, with a value ETF adding a systematic factor exposure. Rebalancing discipline mattered, since value funds often looked cheap after periods of underperformance, which was precisely when buying was most logical. Selecting among the best value ETFs ultimately depended on an investor's existing portfolio composition, tax situation, and willingness to tolerate periods of relative underperformance versus growth.