Value ETFs: Everything You Need to Know
- Value has outperformed growth amid an escalating trade war and a slowing economy.
- Investors are seeking stability, favoring strong fundamentals and steady cash flow.
- Value ETFs may offer a mix of growth, income and lower risk.
Value stocks and the value ETFs that track them have staged a comeback in 2025, outperforming the once-dominant growth stocks.
Amid an escalating trade war and growing concerns over a slowing global economy, investors have sought refuge in companies with strong fundamentals, steady cash flows and attractive valuations.
Value ETFs, which focus on companies trading below their intrinsic worth, have historically provided a balance of growth and income, making them appealing to a broad range of investors.
This article will explore what value ETFs are, their advantages and disadvantages, which investors they are best suited for and their outlook for the remainder of 2025.
What Are Value ETFs and How Do They Invest?
Value ETFs are exchange-traded funds that invest in stocks that are considered undervalued relative to their intrinsic worth, often identified by lower price-to-earnings (P/E) ratios, price-to-book (P/B) ratios and strong dividend yields. These ETFs typically track value-focused indices, such as the S&P 500 Value Index or the Russell 1000 Value Index.
Value investing, popularized by legendary investor Warren Buffett, emphasizes buying high-quality companies at reasonable prices and holding them long term. Value ETFs offer broad exposure to such companies, mitigating individual stock risk while benefiting from the principles of value investing.
These ETFs typically hold stocks with strong fundamentals, consistent earnings and lower valuations relative to growth stocks. Examples include Berkshire Hathaway (BRK.B), JPMorgan Chase (JPM), Johnson & Johnson (JNJ) and ExxonMobil (XOM).
Value ETFs vs. Dividend ETFs
Note that while many value stocks and ETFs pay dividends, they are not typically categorized as dividend ETFs. Both value and dividend ETFs focus on fundamentally strong companies, but value ETFs prioritize stocks with low valuations relative to earnings, while dividend ETFs specifically target companies with consistent and high dividend payouts.
Related: The 5 Best Dividend ETFs for 2025
Top Value ETFs by AUM
| Ticker | Fund | Expense Ratio | AUM | 10-Yr Return |
| VTV | Vanguard Value ETF | 0.04% | $134.4B | 10.4% |
| IWD | iShares Russell 1000 Value ETF | 0.19% | $61.9B | 8.6% |
| IVE | iShares S&P 500 Value ETF | 0.18% | $37.3B | 9.9% |
| VBR | Vanguard Small Cap Value ETF | 0.07% | $28.4B | 7.9% |
| SPYV | SPDR Portfolio S&P 500 Value ETF | 0.04% | $25.2B | 10.1% |
Source: etf.com data as of April 2, 2025. Past performance is no guarantee of future results.
Pros and Cons of Investing in Value ETFs
While value ETFs offer stability and higher dividend payouts compared to growth ETFs, they’re not for everyone. Here are the main pros and cons to consider.
Pros
- Lower volatility: Value stocks tend to be more stable than growth stocks, making value ETFs a safer choice in uncertain markets.
- Income generation: Many value stocks pay dividends, providing consistent income for investors, including retirees.
- Attractive valuations: Value stocks are often underpriced during market downturns, presenting buying opportunities.
- Diversification: ETFs spread risk across multiple undervalued companies rather than relying on a single stock.
Cons
- Slower growth potential: Compared to high-growth technology stocks, value stocks may offer less explosive price appreciation.
- Longer recovery time: Value stocks can remain undervalued for extended periods, requiring patience from investors.
- Sector concentration: Many value funds are overweight in financials, energy, healthcare and industrials, which may underperform in certain economic cycles.
Who Should Invest in Value ETFs?
While value funds can make a smart addition to almost any portfolio, these funds are not best suited for some investors.
Ideal Investors for Value ETFs
- Long-term investors: Those willing to hold through market cycles and benefit from gradual capital appreciation
- Retirees and income-seekers: Investors looking for stable dividends and less volatility
- Risk-averse investors: Those who prefer companies with proven earnings and lower downside risk
Investors Who Might Avoid Value ETFs
- Short-term traders: Value stocks can be slow-moving, making them less ideal for quick gains.
- Aggressive growth investors: Many value funds underweight technology stocks, limiting exposure to fast-growing sectors. Those seeking rapid capital appreciation may prefer growth or momentum ETFs.
- Fixed-income, short-term investors: While value ETFs can provide income through dividends, they may not be suitable for investors needing fixed income or those with time horizons less than three years.
Outlook for Value ETFs in 2025
The performance of value ETFs for the remainder of 2025 will likely depend on macroeconomic conditions, interest rate policies and corporate earnings. If recession fears persist, value stocks may continue to outperform, as investors flock to stability.
Additionally, as higher interest rates weigh on speculative growth stocks, sectors like financials and consumer staples—key components of value ETFs—could benefit. However, if economic growth reaccelerates, growth stocks could regain leadership, creating headwinds for this market segment.
For investors looking for a blend of stability, income and long-term appreciation, value ETFs remain a compelling choice, even in an uncertain market environment. As always, diversification and patience are key to successful investing in value-oriented funds.
