Best Value ETFs: Finding Undervalued Stocks
Value ETFs hold cheap, profitable companies that growth investors overlook. Here is when they shine and which ones to buy.
Don't have time? Here's what you need to know:
- 1Value ETFs hold profitable companies trading at low P/E ratios — the 'boring' half of the market
- 2VTV is the default choice: 0.04% expense ratio, 340+ large-cap value stocks, ~2.5% yield
- 3Value outperformed growth by 4%/year from 1926-2006 but has lagged since 2007
- 4Adding VTV to a VTI core is a factor tilt, not diversification — use it intentionally
Value Stocks: Boring Companies, Solid Returns
Value stocks trade at low prices relative to their earnings, book value, or cash flow. Johnson & Johnson, Procter & Gamble, JPMorgan Chase, Berkshire Hathaway — these are mature, profitable businesses that the market does not price at premium multiples. Value ETFs collect these stocks into a single fund, giving you exposure to the 'cheap' half of the market.
From 1926 to 2006, value stocks outperformed growth stocks by about 4% per year — one of the most documented patterns in finance. Since 2007, growth has dominated thanks to tech. Academics debate whether the 'value premium' has disappeared or is just on a long hiatus. Either way, value stocks add diversification to a growth-heavy portfolio.
Best Value ETFs Compared
VTV is the go-to choice: broad diversification, low cost (0.04%), and exposure to roughly 340 large-cap value stocks. SCHV is the Schwab equivalent at the same price. RPV is more concentrated in deep value (lower P/E) but costs more and carries higher volatility.
| ETF | Index | Expense Ratio | Yield | Holdings | P/E Ratio |
|---|---|---|---|---|---|
| VTV | CRSP U.S. Large-Cap Value | 0.04% | ~2.5% | 340+ | ~15 |
| SCHV | Dow Jones U.S. Large-Cap Value | 0.04% | ~2.4% | 540+ | ~16 |
| IWD | Russell 1000 Value | 0.19% | ~2.0% | 850+ | ~16 |
| RPV | S&P 500 Pure Value | 0.35% | ~2.2% | 120 | ~11 |
| VOOV | S&P 500 Value | 0.10% | ~2.3% | 440+ | ~16 |
Should You Own Value, Growth, or Both?
If you own VTI, you already hold both value and growth stocks at market-cap weights. Adding VTV tilts your portfolio toward value — essentially betting that cheap stocks will outperform over your holding period. This is a factor bet, not core diversification.
A common implementation: 70% VTI (total market), 15% VTV (value tilt), 15% VXUS (international). The value tilt adds exposure to higher-yielding, less volatile companies without abandoning growth entirely. During the 2000-2009 decade, this approach would have significantly outperformed a growth-heavy portfolio.
Tip: Value and growth tend to alternate in leadership over multi-year cycles. Do not chase whichever has performed better recently — that is how you buy at the top of each cycle.
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Frequently Asked Questions
Are value stocks safer than growth stocks?
Generally yes — they are less volatile. Value stocks tend to fall less during crashes because they are already priced low. VTV dropped about 28% in 2020 vs QQQ's 33%. But 'safer' does not mean 'safe' — value stocks still lose money in bear markets.
Why have value stocks underperformed recently?
The 2010s and early 2020s were dominated by high-growth tech stocks (Apple, Google, Nvidia) that value indices do not include or underweight. This does not mean value is dead — it means the cycle favored growth. Value outperformed from 2000-2007, 2021-2022, and could do so again.
Do I need a value ETF if I already own VTI?
No. VTI already holds value stocks at market weight. Adding VTV is an intentional overweight — a factor tilt. It is optional and only makes sense if you believe value will outperform over your time horizon or if you want the higher dividend yield.
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Alex Harrington
CFA Level II Candidate, Finance & Economics
Alex Harrington is an independent ETF researcher and personal finance writer with over 8 years of experience analyzing exchange-traded funds. A CFA Level II candidate with a background in economics, Alex has reviewed 800+ ETFs and helped thousands of beginners build their first investment portfolios through clear, jargon-free education.
This content is for educational purposes only and does not constitute financial advice. Past performance does not guarantee future results. Consult a licensed financial advisor before making investment decisions.