It’s hard to categorize investment styles neatly, especially given the ever-expanding universe of investable assets. But one strategy that’s consistently stayed near the top of the list for decades is value investing.
The roots go back nearly a century to Benjamin Graham, widely considered the “father of value investing.” His framework focused on finding stocks that were trading below their intrinsic value and emphasizing a “margin of safety.”
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Graham’s core belief was that investors should only buy a company if it’s priced far enough below what it’s truly worth, in order to provide some buffer against mistakes or bad luck. In general, this style of value investing approach is deeply fundamental and bottom-up, concentrating on individual securities.
But not all value investing has to be hand-picked. A competing approach came later from academics Eugene Fama and Kenneth French, who built the Fama-French three-factor model.
They expanded the traditional capital asset pricing model (CAPM) by introducing two more factors, size and value, to better explain stock returns. Their definition of the value premium was based on what they called “High minus Low” or HmL.
This metric measured the historical performance difference between stocks with high book-to-market ratios (cheap relative to fundamentals) and those with low ones (expensive growth stocks).
“The value premium is underpinned by straightforward logic: All else being equal, paying a lower price for a stock and its future cash flows can lead to higher expected returns,” says Marlena Lee, global head of investment solutions at Dimensional Fund Advisors. “Solutions designed around value can be a sensible way to orient portfolios to potentially outperform benchmarks.”
Unlike Graham’s style, which required intense due diligence on single names and concentrated bets, the Fama-French model showed that value traits could be captured systematically across the entire market.
This gave rise to a wave of value-themed mutual funds and exchange-traded funds. With improvements in indexing technology and portfolio management, it’s now easier than ever to build diversified baskets of value-oriented stocks at ever-decreasing costs.
“ETFs are a great way of gaining exposure to the value factor because it’s difficult to identify it,” says Anessa Custovic, chief investment officer at Cardinal Retirement Planning Inc. “You need a lot of fundamental data and intensive analysis to identify a potential value stock, and most retail investors don’t have the expertise or time to do this.”
For investors, the advent of ETFs has been a game-changer. Value investing is no longer reserved for elite stock pickers or hedge fund managers. Today, retail investors can gain broad value exposure through various ETFs, some of which use refined methodologies that go beyond traditional Fama-French metrics.
Here are seven of the best value ETFs to buy and hold in 2025:
| ETF | Expense ratio |
| Schwab U.S. Large-Cap Value ETF (ticker: SCHV) | 0.04% |
| Invesco S&P 500 Pure Value ETF (RPV) | 0.35% |
| Dimensional U.S. Marketwide Value ETF (DFUV) | 0.21% |
| Avantis U.S. Large Cap Value ETF (AVLV) | 0.15% |
| Avantis U.S. Small Cap Value ETF (AVUV) | 0.25% |
| Distillate U.S. Fundamental Stability & Value ETF (DSTL) | 0.39% |
| Distillate Small/Mid Cash Flow ETF (DSMC) | 0.55% |
Schwab U.S. Large-Cap Value ETF (SCHV)
“If you are looking at a long-term, buy-and-hold retirement investment, consider a passive value ETF, ” Custovic says. “These will track an index and have lower fees than an actively managed ETF.” For example, SCHV, which tracks the Dow Jones U.S. Large-Cap Value Total Stock Market Index, charges a 0.04% expense ratio. For a $10,000 investment, that implies just $4 in annual fee drag.
Passive value ETFs like SCHV are best suited for investors who want a mild tilt towards the value factor. With 526 total holdings, the ETF is still fairly diversified. Adding SCHV to a portfolio can be a good way for investors to reduce concentration risk in growth-oriented sectors like technology that currently dominate the U.S. stock market. SCHV also serves as a decent dividend ETF with a 2.2% 30-day SEC yield.
Invesco S&P 500 Pure Value ETF (RPV)
“RPV is an enhancement to S&P’s style methodology aimed at providing more targeted exposure to value stocks in the S&P 500 Index,” says Nick Kalivas, head of factor and core equity ETF product strategy at Invesco. “RPV uses the same stock screening process as the S&P 500 Value Index, but then differs by only holding stocks with the highest value scores, creating deeper value exposure.”
The screens used by RPV include book-value-to-price ratio, earnings-to-price ratio and sales-to-price ratio. The result is a concentrated portfolio of 107 holdings with a low average price-to-earnings ratio of 12.1. “Furthermore, stocks in the portfolio are weighted by their value score, not market cap, and there is no overlap with growth stocks like the first-generation S&P 500 style indices,” Kalivas explains.
Dimensional U.S. Marketwide Value ETF (DFUV)
“Dimensional’s value strategies use reliable information in prices to target higher expected returns within value stocks,” Lee explains. “A daily flexible process allows us to maintain consistent emphasis on higher-expected-return securities through time, while still being competitively priced within the lowest quartile of Morningstar category peers.” DFUV is the firm’s broad-market value ETF.
Despite being an active ETF, DFUV maintains a low turnover rate of 4% and charges a reasonable 0.21% expense ratio, in line with some passive ETFs. “Dimensional has decades of experience helping investors with our rules-based approach, which incorporates profitability alongside size and value into security selection and uses daily implementation to maintain consistent focus on the asset class,” Lee says.
[READ: 7 Best Long-Term ETFs to Buy and Hold]
Avantis U.S. Large Cap Value ETF (AVLV)
“Many confuse value as just being something that is low-priced, but a low price due to low profits or a weak balance sheet is not necessarily value — those are companies that have a low price because they deserve one and do not present an attractive investment opportunity,” says Eduardo Repetto, chief investment officer at Avantis Investors. This is why many modern value ETFs also screen for profitability.
AVLV’s combination of value and profitability screens has historically paid off. Over the trailing three-year period, this ETF has outperformed the Russell 1000 Value index, returning an annualized 9.8% versus 8.2% for the benchmark. A relatively low 0.15% expense ratio also helped minimize drags on performance. The ETF is highly popular with just shy of $7.7 billion in assets under management.
Avantis U.S. Small Cap Value ETF (AVUV)
“Small-cap companies trading at attractive prices and with good profitability are trading at very appealing relative valuations looking back the last 20-plus years,” says Daniel Ong, senior portfolio manager at Avantis Investors. “These companies present a great opportunity versus other parts of the market that are trading at rich multiples.” Investing in these stocks captures two Fama-French premiums.
AVUV is Avantis Investors’ flagship small-cap value strategy ETF with more than $16 billion in assets. This ETF has strongly outperformed its benchmark, the Russell 2000 value index, over the trailing five- and three-year periods. The addition of a profitability filter is highly important in the small-cap value space, as it filters out “junk” companies with poor balance sheets that look cheap at a cursory glance.
Distillate U.S. Fundamental Stability & Value ETF (DSTL)
Some modern value ETFs take an entirely different approach with their methodology. “Measuring value is not quite as simple as it was in the past,” says Thomas Cole, co-founder at Distillate Capital. “Ironically, after academia identified the premium associated with value in the early 1990s, the measure they most utilized to identify the cheapest stocks began to break down.” DSTL offers a more modernized approach.
“Utilizing free cash flow yield rather than earnings or book value allows you to avoid accounting issues, and once again accurately assess the relative opportunities in the market,” Cole explains. This metric is the core of DSTL’s methodology, and has helped the ETF strongly outperform the Russell 1000 value index since its inception in October 2018, while coming very close to the S&P 500 index’s total return.
Distillate Small/Mid Cash Flow ETF (DSMC)
“Small caps follow long cycles and are particularly out of favor today, but are even more attractive if you simply avoid the companies that do not generate positive cash flows,” Cole says. “Smaller companies, excluding the money-losing businesses, have a substantial valuation advantage over small-cap index benchmarks, and are priced much more attractively than the S&P 500.” For this, Distillate offers DSMC.
DSMC applies Distillate’s free cash flow yield methodology to a universe of 1,000 profitable small- and mid-cap stocks screened for low debt levels. The eligible companies are then pared down to a group of 150, weighted by free cash flow generation with quarterly rebalancing. While the ETF has run into headwinds recently, it is still outperforming its benchmark, the Russell 2000 index, since the fund’s inception.
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7 Best Value ETFs to Buy and Hold originally appeared on usnews.com
Update 07/02/25: This story was published at an earlier date and has been updated with new information.
