Many investors are attracted to value stocks because of the possibility of generating outsized returns. But identifying stocks that are significantly mispriced by the market isn't easy and requires a lot of research. If you're interested in investing in value stocks but don't want to choose individual stocks yourself, then buying shares in a value stock ETF may be a good solution.

An exchange-traded fund (ETF) that invests in value stocks uses specific criteria to find companies whose intrinsic values substantially exceed the market values implied by their stock prices. By investing in a wide range of undervalued companies, value stock ETFs confer instant portfolio diversification. Buying shares in a value stock ETF can be a safe and easy way to invest in companies in cyclical industries.

Here are the best value stock ETFs for investors.

Letters ETF in a graphic.

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Best value ETF overall

The Vanguard Value ETF (NYSEMKT:VTV) is the overall best option for investors who want diversified portfolio exposure to value stocks. With more assets under management than any other ETF in the sector, the Vanguard Value ETF tracks the CRSP Large Cap Value Index by investing directly in its component companies. The ETF holds shares of the companies in the index in close proportion to their index weighting.

The CRSP Large Cap Value Index, while predominantly composed of large-cap companies, also includes companies with market capitalizations as low as $1.5 billion, so investing in this ETF provides some exposure to mid-cap stocks.

Vanguard keeps transaction fees low for the ETF's shareholders by allowing the proportional holdings of the ETF to deviate slightly from the composition of the underlying index. Despite that allowance, the difference between the performance of the Vanguard Value ETF and that of the index it tracks is extremely low and among the best in the sector.  The ETF's turnover was just 10% in 2020.

With a best-in-class expense ratio of only 0.04%, investors don't pay much in fees either. That makes the Vanguard Value ETF one of the least expensive and most efficient ways to invest in more than 300 value stocks.

Best large-cap value ETF

Buying shares in the Vanguard Value ETF is also the best way to gain exposure to undervalued large-cap companies. This ETF's low expense ratio, low turnover rate, and high performance correlation with the underlying index all recommend the fund as the best large-cap value ETF.

Despite this ETF being focused on large-cap companies, it still provides portfolio diversification to investors by not investing too heavily in any single stock. The ETF's 10-largest holdings comprise about 20% of the value of the fund, and the next 10 companies by market value account for another 12.5% of the ETF's value.

Best mid-cap value ETF

The Vanguard Mid-Cap Value ETF (NYSEMKT:VOE) tracks the CRSP U.S. Mid Cap Value Index by owning stocks in proportion to their weightings in the index. The CRSP U.S. Mid Cap Value Index includes companies with market capitalizations between about $1.5 billion and $40 billion and identifies value stocks based on several metrics. Companies that have, relative to their share prices, high book values, high projected earnings, high historic earnings, high dividends, or high sales are all potential targets for inclusion in the index.

Since the CRSP U.S. Mid Cap Value Index is governed by more criteria, it has a relatively high turnover rate averaging 39% annually. That's significantly higher than the annual turnover rate of 20% for the equally popular iShares Russell Mid-Cap Value ETF (NYSEMKT:IWS). But the Vanguard Mid-Cap Value ETF's low expense ratio of 0.07% and high performance correlation with the underlying index make this ETF our pick for the best mid-cap value-oriented fund.

Best small-cap value ETF

The Vanguard Small-Cap Value ETF (NYSEMKT:VBR) tracks the CRSP U.S. Small Cap Value Index. The ETF's holdings adjust quarterly when the index is reconstituted, but the manager of this ETF ensures that the annual turnover rate is commensurate with the turnover rates of competing funds.

The CRSP U.S. Small Cap Value Index includes companies in the 15th percentile or lower by market capitalization, equating to a valuation range of about $30 million to $16 billion. The index tracks a total of more than 900 companies, with the largest companies by market value comprising less than 5% of the index's weight.

This ETF stands out because its performance very closely tracks the performance of the underlying index -- a notable accomplishment since small-cap companies have the most volatile stock prices. The Vanguard Small-Cap Value ETF also has a low expense ratio of just 0.07%.

Best international large-cap value ETF

The BlackRock (NYSE:BLK) iShares MSCI Intl Value Factor ETF (NYSEMKT:IVLU) tracks the MSCI World ex USA Enhanced Value Index. While this ETF includes some mid-cap stocks, it's mostly composed of large-cap companies since the index itself is weighted by the indexed companies' market values.

The MSCI World ex USA Enhanced Value Index comprises about 350 companies operating in approximately 20 developed markets, including Japan, the U.K., France, and Germany, which account for most the index's weight. The index determines which companies to include based on how a company's stock price compares to its book value or forward earnings or how its enterprise value compares to its cash flow from operations. 

This ETF's expense ratio of 0.30% is higher than the expense ratios of many domestic ETFs, but it is still an attractive option for investors seeking a global value-oriented ETF.

Best emerging market value ETF

Investors seeking an ETF that provides portfolio exposure to undervalued companies in emerging markets can opt to buy shares in the VictoryShares USAA MSCI Emerging Markets Value Momentum ETF (NYSEMKT:UEVM). This ETF tracks the MSCI Emerging Markets Select Value Momentum Blend Index, which selects companies for inclusion in the index based on both value and growth momentum. The index assigns to each included company a single score and gives more weight in the index to the companies with the lowest stock price volatility. Companies from China, South Korea, and Taiwan account for the majority of the index's weight.

This ETF uses representative sampling to track the underlying index, meaning that the fund owns only a fraction of the stocks included in the index. Representative sampling by an ETF, while more efficient and cost-effective, reduces the correlation between the performance of the ETF and that of the index it tracks. This ETF's expense ratio of 0.45% is about average for emerging market ETFs in general.

Best value dividend ETF

The dividend yields of value stocks are typically high, and the companies with the largest market caps usually pay reliable dividends. That makes the Vanguard Value ETF, with its focus on large-cap companies, our pick for the best value dividend ETF. The dividend yield for this ETF is well above 2%, which is especially attractive since the fund's expense ratio is just 0.04%.

Best deep value ETF

Investors seeking exposure via an ETF only to stocks that are deeply undervalued can buy shares in Empirical Finance's Alpha Architect U.S. Quantitative Value ETF (NYSEMKT:QVAL). This ETF uses a computer algorithm to identify undervalued companies based on their enterprise values as multiples of their operating incomes. The fund also excludes companies that show signs of financial distress or use questionable accounting practices to boost reported cash flows. The top 100 companies produced by the algorithm are then evaluated based on current profitability, stability, and recent operational improvements, and the top 50 companies are selected for inclusion in the ETF.

This ETF, despite having a slightly high expense ratio of 0.49%, is still a solid choice for ETF investors focused on companies with the most unrecognized value.