Best Value ETFs of May 2024

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 ETF may be a good solution.

Value stocks have lagged the overall market since the Great Recession, but they're starting to come back into favor. They held up well during the market downturn in 2022. While growth stocks came roaring back in 2023, value stocks have still outpaced their peers over the last few years. The S&P 500 Value index outperformed the overall S&P 500 index by 8.5% from 2021 through 2023.

Despite their strong recent performance, value stocks may still present an opportunity to expand your portfolio. In fact, most investors expect value stocks to continue outperforming their growth counterparts for the foreseeable future, which means value investing should remain in favor.

An exchange-traded fund (ETF) that invests in value stocks uses specific criteria to find companies with intrinsic values that 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.

Top ETFs to invest in 2024

Here are the best value stock ETFs for investors:

Best value ETF overall

Best value ETF overall

The Vanguard Value ETF (VTV 0.58%) 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. This ETF holds shares of the companies in the index in close proportion to their index weighting.

The top holding in the ETF is Berkshire Hathaway (BRK.A -0.56%)(BRK.B 0.07%). The holding company, whose CEO is Warren Buffett, holds several positions in value stocks and occasionally acquires companies Buffett and his team identify as undervalued. As such, it typically presents good value for investors.

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 2023.

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

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. The 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 the ETF's focus on large-cap companies, it still provides portfolio diversification to investors by not investing too heavily in any single stock. The ETF's 10 top holdings make up about 22.8% of the value of the fund, and the next 10 companies by market value account for another 11.1% of the ETF's value.

Best mid-cap value ETF

Best mid-cap value ETF

The Vanguard Mid-Cap Value ETF (VOE 0.65%) 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 of 21.9%.  However, this compares well with other mid-cap value index funds. Combined with an extremely low expense ratio of just 0.07%, the Vanguard Mid-Cap Value ETF is a top way to gain exposure to medium-sized companies undervalued by the market.

Best small-cap value ETF

Best small-cap value ETF

The Avantis US Small Cap Value ETF (AVUV 1.0%) is an actively managed small-cap value fund. Its benchmark index is the Russell 2000 Value Index, which tracks the returns of the 2,000 smallest U.S. companies with low price-to-book ratios and lower forecast growth values.

Although technically an active ETF, the fund manager aims to maintain the benefits of indexing such as diversification and low turnover. Active management, however, allows the fund to add value for investors by using current price and profitability information. As a result, the Avantis US Small Cap Value ETF gives investors more concentrated exposure to the small-cap value factor than most small-cap value index funds.

The turnover rate for the fund is very low relative to other small-cap value funds at just 7%. While investors will pay an expense ratio of 0.25% (higher than the average index fund), the premium provides investors with greater exposure to small-cap value stocks. The combination of a passive philosophy with some active implentation won't be for everyone, since it does involve risk of underperforming the benchmark. Still, Avantis is one of the best ways to gain concentrated exposure to small-cap value stocks.

Best international large-cap value ETF

Best international large-cap value ETF

The BlackRock (BLK 0.91%) iShares MSCI Intl Value Factor ETF (IVLU 0.6%) tracks the MSCI World ex USA Enhanced Value Index. Although 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 consists of about 350 companies operating in 22 developed markets, with Japan, the UK, France, and Germany accounting for most of 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

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 (UEVM 0.4%). 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 each included company a single score and gives more weight to companies with the lowest stock price volatility. Companies from China, South Korea, Taiwan, and India account for the majority of the index's weight.

The 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 the index it tracks. The ETF's expense ratio of 0.45% is about average for emerging market ETFs in general.

Best value dividend ETF

Best value dividend ETF

Most stocks paying a dividend are considered value stocks. As such, investors will often find overlap in ETFs focused on value stocks and those focused on dividend stocks. And if you want a higher dividend yield than the average value stock ETF, you should consider the Vanguard High Dividend Yield ETF (VYM 0.57%).

The fund seeks to track the performance of the FTSE High Dividend Yield Index, which includes all stocks with relatively high dividend yield forecasts. This forward-looking criteria ensures the dividend yield of the index remains consistently high.

Indeed, the recent yield on the Vanguard High Dividend Yield ETF is 2.8%, which is better than the Vanguard Value ETF by about 0.6 percentage points. Importantly, it maintains a tilt toward large-cap value stocks, so investors still gain exposure to value. The ETF charges an expense ratio of just 0.06%.

Best deep value ETF

Best deep value ETF

Investors seeking exposure only to stocks that are deeply undervalued via an ETF can buy shares in Roundhill Acquirers Deep Value ETF (DEEP 0.67%). The ETF seeks to hold stocks trading at a low enterprise value relative to operating earnings.

It does so by tracking the Acquirer's Deep Value Index, which evaluates a company's financial statements using the same analysis activist investors and buyout firms use to identify targets. It then removes companies with a statistical measure of fraud or financial distress. The top 100 companies are selected and equally weighted. The index rebalances quarterly.

Despite having a relatively high expense ratio of 0.80%, the ETF is still a solid choice for investors focused on companies with the most unrecognized value. It does, however, produce a high turnover ratio as a result of algorithmically selecting 100 companies every quarter. This can produce significant tax consequences for investors. One option is to use a tax-advantaged account such as an IRA to invest in such high-turnover funds.

Related investing topics

The best value ETFs

1. Vanguard Value
2. Vanguard Mid-Cap Value
3. Avantis US Small-Cap Value
4. iShares MSCI Intl Value Factor
5. VictoryShares USAA MSCI Emerging Markets Value Momentum
6. Vanguard High Dividend Yield
7. Roundhill Acquirers Deep Value ETF

These seven ETFs represent some of the best-in-class ETFs for their respective focuses. Great management teams with a fundamental approach to providing investors exposure to their specified factors make them top choices for investors.