US Large-Cap Value Showdown: AVLV Edges Out VTV in Large-Cap Value Factor

The article compares the performance of VTV (Vanguard Value ETF) and AVLV (iShares Russell 1000 Value ETF) in the large-cap value space. The author suggests that while VTV has a slightly higher return over the past decade, AVLV's lower expense ratio and slightly lower standard deviation make it a better option for risk-adjusted returns. The author also proposes a barbell strategy of holding US large-cap stocks and tilting towards value for better returns.

In the realm of large-cap value investing, two Exchange-Traded Funds (ETFs) have garnered significant attention: the Vanguard Value ETF (VTV) and the iShares Russell 1001 Value ETF (AVLV) [1]. Both ETFs aim to track the performance of large-cap value stocks but differ in certain aspects, including expense ratios, returns, and risk profiles.

VTV, with assets totaling over $77 billion, seeks to track the performance of the CRSP US Large Cap Value Index [1]. The fund employs an indexing investment approach, replicating the target index by investing in the stocks that make up the index and holding them in approximately the same proportion as their weightings [1]. With a low expense ratio of 0.04%, VTV is an attractive option for value investors seeking to minimize costs [1].

In contrast, AVLV, with assets totaling approximately $35 billion, aims to track the performance of the Russell 1000 Value Index [2]. Like VTV, AVLV employs an indexing investment approach and replicates the target index by investing in the stocks that make up the index and holding them in approximately the same proportion as their weightings [2]. AVLV also boasts a competitive expense ratio of 0.06%, slightly higher than VTV [1].

When comparing the returns of the two ETFs, VTV has outperformed AVLV in the short-term, with a 12.40% year-to-date (YTD) gain compared to AVLV's 10.62% YTD gain [1][2]. However, over the past 12 months, VTV's 62% gain is significantly higher than AVLV's 35% gain [1]. Furthermore, the gap widens even more when looking at the past three years, with VTV up 91% compared to AVLV's 28% gain [1].

Despite VTV's stronger performance, investors should consider the risk-adjusted returns when choosing between the two ETFs. AVLV's slightly lower standard deviation (33.72 compared to VTV's 34.07) [1][2] indicates that it may offer a slightly more stable investment experience for risk-averse investors.

In conclusion, both VTV and AVLV are compelling options for investors seeking exposure to large-cap value stocks. While VTV has a slightly higher return over the past decade, AVLV's lower expense ratio and slightly lower standard deviation make it an attractive choice for risk-averse investors seeking to minimize costs and potentially achieve more stable returns.

For those looking to diversify their portfolios further, a barbell strategy of holding US large-cap stocks and tilting towards value may be an effective approach to maximize returns while managing risk [3].

References:
[1] ETF Trends. (2023, February 20). Vanguard ETFs: Growth vs. Value Battle Roars On. https://www.etftrends.com/smart-beta-channel/vanguard-etfs-growth-value-battle-roars-on/
[2] Picture Perfect Portfolios. (n.d.). Vanguard Value ETF (VTV) Review. https://pictureperfectportfolios.com/vanguard-value-etf-vtv-review/
[3] Investopedia. (n.d.). Barbell Investing. https://www.investopedia.com/terms/b/barbell_investing.asp