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Vanguard Extended Market Index Fund ETF Shares

VXF:NYSEArca

equity ETF | passive | Vanguard | Tracks S&P Dow Jones Indices

Market Price

US$219.17 (26 Jan 2026)

+9.10% (YoY)

NAV

US$219.54

-0.17% Discount

Yield

1.14%

-25.17% (YoY)

Expense Ratio

5.00%

+5% vs Avg: 98.00%

Box Set (ETF)

⚡ Executive Summary

📊 The Bottom Line

This ETF tracks the S&P Completion Index, offering exposure to small and mid-size U.S. companies that are not part of the S&P 500. It provides a highly diversified, low-cost way to access this market segment. The bull case projects NAV reaching US$263.00 (+20%) while the bear case suggests US$175.34 (-20%) over the next 12-18 months. Its extremely low expense ratio and broad diversification make it a compelling option for complementing a large-cap core portfolio.

⚖️ Risk vs Reward

The underlying small and mid-cap holdings trade at a P/E ratio of 19.8x, which is generally in line with its benchmark. While historically more volatile than large-cap equities, this segment offers potential for higher growth, especially during periods of economic expansion. VXF's exposure to potentially less profitable, high-growth companies (excluded from the S&P 500) contributes to its higher volatility compared to broader market indices. The current market environment suggests a balanced risk-reward, with growth potential offset by sensitivity to economic shifts. The fund's tight tracking and minimal premium/discount to NAV mitigate ETF-specific trading risks.

🚀 Why VXF Could Soar

• Strong economic expansion could fuel outperformance in small and mid-cap companies, historically benefiting this segment significantly.
• Increased market breadth, with leadership extending beyond mega-cap stocks, would broaden gains across VXF's diversified holdings.
• Accretive mergers and acquisitions among smaller companies could drive valuation upside for several of the fund's constituents.

⚠️ What Could Go Wrong

• A slowdown in economic growth or rising interest rates could disproportionately impact smaller, growth-oriented companies within the fund, leading to underperformance.
• Increased market concentration in mega-cap technology stocks could divert capital from the extended market, hindering VXF's relative returns.
• Any sustained period of risk aversion could see investors rotate out of more volatile small and mid-cap segments, putting pressure on VXF's holdings.

🏢 Fund Overview

What Are You Actually Buying

The extended market segment comprises small and mid-size U.S. companies that are not included in the S&P 500 Index, representing a vast universe of businesses.
These companies often offer higher growth potential than large-caps, driving innovation and expanding into new markets, but may exhibit greater share price volatility.
The sector features a diverse range of industries, with a notable tilt towards technology, and serves as a vital component for investors seeking broad U.S. equity exposure beyond the largest companies.
Typically, small and mid-cap companies are more sensitive to domestic economic conditions and have less global revenue exposure compared to large multinational corporations.

Market Dynamics & Outlook

The extended market currently presents a mixed outlook, with valuations for some growth-tilted segments at elevated levels, driven by enthusiasm for innovative technologies.
Economic indicators suggesting resilience or expansion typically support this market segment, but a deceleration in growth or rising capital costs could create headwinds.
Technology remains the largest sector allocation at 18.32% (as of December 31, 2025), influencing the fund's sensitivity to shifts in tech sentiment.
Increased M&A activity has historically been a catalyst for small and mid-cap valuations, and continued deal flow could provide support.

🎯 Why This Matters

Understanding the extended market's characteristics is essential, as it offers differentiated growth drivers and diversification benefits compared to large-cap stocks. Its inherent volatility and sensitivity to economic cycles demand a thoughtful approach, making it particularly relevant for investors seeking to capture broader U.S. market upside or complement an S&P 500 core.

📈 Valuation & Analysis

Historical Performance

YTD

+4.93%

+11.40%

Yearly Growth (3Y)

+17.79%

Yearly Growth (5Y)

+6.17%

Yearly Growth (10Y)

+11.01%

Yearly Growth (Since Inception)

+9.74%

Current Valuation

The Vanguard Extended Market Index Fund ETF's underlying holdings trade at an aggregate price-to-earnings (P/E) ratio of 19.8x and a price-to-book (P/B) ratio of 2.6x as of December 31, 2025. These figures are closely aligned with its benchmark, the S&P Completion Index, which has a P/E of 20.0x and a P/B of 2.6x. The current dividend yield stands at 1.10% as of December 31, 2025. This valuation profile suggests that the extended market segment, while containing growth-oriented companies, is trading at a fair valuation relative to its tracking index. However, it's worth noting that smaller companies can sometimes carry higher growth premiums, reflecting their potential for future expansion.

The Bull Case - Upside to

Strong Economic Growth Boosts Smaller Firms

Medium Probability

If U.S. GDP growth exceeds expectations by 1% for 2026, the extended market, particularly small-caps, could see a 10-15% earnings surprise, potentially driving VXF's NAV up by 15% through multiple expansion.

Renewed Investor Interest in Market Breadth

Medium Probability

A rotation of investor capital from mega-cap tech into broader market segments could increase demand for mid and small-cap stocks, leading to a 10-12% re-rating in their P/E multiples and a 10% NAV increase for VXF.

Favorable Monetary Policy Environment

High Probability

If the Federal Reserve initiates more aggressive rate cuts than anticipated, it would reduce borrowing costs for smaller companies, improving profitability and potentially adding 8-10% to VXF's NAV.

The Bear Case - Downside to

Economic Slowdown Impacts Cyclical Holdings

Medium Probability

A U.S. economic recession would likely trigger a 15-20% decline in earnings for mid and small-cap companies, potentially causing VXF's NAV to fall by 20-25% due to reduced demand and P/E contraction.

Sustained High Interest Rates

Medium Probability

If interest rates remain elevated or rise further, it could increase debt servicing costs for highly leveraged smaller companies and compress valuations, leading to a 10-15% NAV decline for VXF.

Underperformance of Growth Style

Medium Probability

A prolonged shift from growth to value investing could negatively impact VXF's growth-tilted portfolio, leading to a 10-12% underperformance relative to broader market benchmarks.

Risk/Reward Assessment

The Vanguard Extended Market Index Fund ETF offers a compelling risk-reward profile for investors seeking exposure to the growth potential of U.S. small and mid-cap companies. The bull case is supported by a potential economic rebound and a rotation into broader market segments, which could drive significant upside from current valuations. However, the bear case highlights the inherent sensitivity of these companies to economic downturns and rising interest rates, which could lead to substantial drawdowns. The fund's diversification helps mitigate idiosyncratic risks, but market-wide factors remain key drivers of performance. For investors with a long-term horizon and tolerance for higher volatility, VXF offers a cost-effective vehicle to participate in the growth dynamics of the extended U.S. equity market. The potential upside of approximately 20% is balanced by a similar downside risk, necessitating careful monitoring of macroeconomic trends.

Peer Comparison

• VXF boasts a significantly lower expense ratio (0.05%) compared to the category average, providing a considerable cost advantage for long-term investors. • Its broad diversification across over 3,400 holdings offers more comprehensive extended market exposure than many peers, mitigating single-stock risk. • With US$37.52B in AUM, VXF is a highly liquid ETF, ensuring efficient trading and tighter bid-ask spreads. • While VXF provides broad extended market exposure, peers like VOT offer a more focused mid-cap growth tilt, and IJR specializes in small-cap exposure, allowing for precise portfolio construction.

Fund	Expense Ratio	AUM (B)	1Y Return	3Y Return	5Y Return	Yield
iShares Core S&P Mid-Cap ETF (IJH)	5.00%	US$108.7B	7.42%	12.53%	9.08%	1.33%
Vanguard Mid-Cap Growth ETF (VOT)	7.00%	US$31.9B	10.72%	16.63%	6.34%	0.62%
iShares Core S&P Small-Cap ETF (IJR)	7.00%	US$68.8B	8.01%	9.94%	5.46%	1.48%

🎯 Why This Matters

The detailed valuation and peer comparison highlight VXF's strong competitive positioning in terms of cost and diversification within the extended U.S. equity market. Investors must weigh the potential for higher growth and broader market exposure against the inherent volatility and sector-specific risks, particularly when considering allocations relative to large-cap holdings. Its role as a complement to core portfolios is crucial for those seeking comprehensive market coverage.

📊 Appendix

Top 10 Holdings (80+ of ETF Value)

#	Ticker	Logo	Name	Sector	Weight
1	SNOW	S	Snowflake Inc.	Technology	1.1%
2	CRH	C	CRH Public Limited Company	Industrials	1.0%
3	MRVL	M	Marvell Technology	Technology	1.0%
4	VRT	V	Vertiv	Industrials	0.9%
5	NET	C	Cloudflare	Technology	0.8%
6	RBLX	R	Roblox	Communication Services	0.8%
7	ALNY	A	Alnylam Pharmaceuticals	Healthcare	0.7%
8	CVNA	C	Carvana	Consumer Cyclical	0.7%
9	FERG	F	Ferguson Enterprises	Industrials	0.6%
10	MSTR	M	MicroStrategy Inc.	Technology	0.6%

Fund Mechanics

How It Works

The Vanguard Extended Market Index Fund ETF employs an indexing investment approach, passively managed to track the performance of the S&P Completion Index. This index is designed to measure the investment return of small- and mid-capitalization stocks by removing all S&P 500 stocks from the broader S&P Total Market Index. The fund utilizes a sampling strategy, holding a diversified collection of securities that, in aggregate, mirrors the full index in terms of key characteristics such as industry weightings, market capitalization, price/earnings ratio, and dividend yield. The S&P Completion Index is market-capitalization weighted and typically rebalanced on a quarterly basis. This methodology aims to minimize transaction costs while maintaining consistent exposure to the targeted market segment. Investors use VXF to complement an S&P 500 fund, effectively replicating a total U.S. stock market exposure.

Holdings Breakdown

Number of Holdings

3394

Top 10 Concentration

804.0%

Top 20 Concentration

1200.0%

Turnover Rate

1060%

Category	Weight	Description
Industrials	19.1%
Information Technology	18.3%
Financials	16.3%
Health Care	14.2%
Consumer Discretionary	10.3%
Real Estate	5.3%
Materials	4.2%
Communication Services	4.0%
Energy	3.7%
Consumer Staples	2.6%
Utilities	2.0%

Cost Efficiency

Expense Ratio

5.00%

Median Bid-Ask Spread

50.000%

Metric	1 Year	3 Year	5 Year
Tracking Error	12.00%	N/A	N/A
Tracking Difference	9.00%	17.00%	13.00%

Expense Ratio History

Year	Expense Ratio
2025	5.00%
2024	5.00%

Performance History

Year	ETF Return	Benchmark Return	Tracking Diff	Volatility	Max Drawdown	Sharpe Ratio
2025	11.40%	11.32%	0.08%	N/A	N/A	N/A
2024	16.89%	16.88%	0.01%	N/A	N/A	N/A
2023	25.49%	24.97%	0.52%	N/A	N/A	N/A
2022	-26.49%	-26.54%	0.05%	N/A	N/A	N/A
2021	12.38%	12.35%	0.03%	N/A	N/A	N/A
2020	32.27%	32.17%	0.10%	N/A	N/A	N/A
2019	28.06%	27.95%	0.11%	N/A	N/A	N/A
2018	-9.35%	-9.57%	0.22%	N/A	N/A	N/A
2017	18.00%	18.11%	-0.11%	N/A	N/A	N/A
2016	16.22%	15.95%	0.27%	N/A	N/A	N/A
2015	-3.26%	-3.35%	0.09%	N/A	N/A	N/A

Annualized Return Since Inception

9.74%

Detailed Peer Comparison

Ticker	Name	Issuer	Exp Ratio	AUM (B)	1Y	3Y	5Y	Yield	StdDev 3Y	Sharpe 3Y	Spread
IJH	iShares Core S&P Mid-Cap ETF	BlackRock iShares	5.00%	US$108.7B	7.4%	12.5%	9.1%	1.33%	16.56%	N/A	N/A
VOT	Vanguard Mid-Cap Growth ETF	Vanguard	7.00%	US$31.9B	10.7%	16.6%	6.3%	0.62%	14.94%	0.67	N/A
IJR	iShares Core S&P Small-Cap ETF	BlackRock iShares	7.00%	US$68.8B	8.0%	9.9%	5.5%	1.48%	18.06%	0.53	N/A
Category Average			6.30%	—	9.1%	13.0%	7.0%	1.14%	—	0.60	—

Risk Metrics

Beta

1.11

R-Squared

0.75

Standard Deviation

1 Year	3 Years	5 Years	10 Years
15.65%	18.90%	N/A	N/A

Sharpe Ratio

1Y	3Y	5Y	10Y
0.45	0.67	0.26	0.57

Sortino Ratio

3 Years	5 Years
1.19	N/A

Maximum Drawdown

1 Year	3 Years	5 Years	Since Inception
N/A	N/A	N/A	58.03%

Upside Capture

15800.0%

Downside Capture

10700.0%

Correlations

S&P 500

0.90

Aggregate Bond

0.20

MSCI ACWI

0.85

Gold

0.05

Liquidity & Trading

Volume

Avg Daily Shares

465,921

Avg Daily Dollar Volume

US$0.0M

Trend

decreasing

Bid-Ask Spread

Metric	Value
Median (Percent)	50.000%
Median (Dollar)	US$1.09
During Hours	N/A
At Close	N/A
Volatility	low

Premium/Discount to NAV

Metric	Value
Current	-5.00%
30-Day Average	N/A
1-Year Average	N/A
Standard Deviation	N/A
Max Premium (1Y)	N/A
Max Discount (1Y)	N/A

Creation/Redemption Activity

Trend

increasing net inflows

Net Flows

Period	Net Flow
1 Month	US$0.0M
1 Quarter	US$0.0M
1 Year	US$0.0M

⚠️ Disclaimer: This ETF research report is for informational and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell securities. EC² Invest is not a registered investment advisor. All data is sourced from public sources and may contain errors. Past performance does not guarantee future results. ETF investing involves risk, including possible loss of principal. Always conduct your own research and consult with a qualified financial professional before making investment decisions.