The Vanguard Small Cap ETF (VB +1.85%) and the iShares Morningstar Small Cap ETF (ISCB +1.83%) both provide cost-effective access to small-cap stocks, yet they differ notably in their assets under management (AUM) and sector allocations.
Small-cap funds attract investors looking to tap into the growth potential of smaller U.S. firms that larger indexes might overlook. Although both ETFs offer broad exposure to the small-cap market, their different methodologies result in varied portfolio outcomes and performance over time.
Cost and Size Snapshots
| Metric | VB | ISCB |
|---|---|---|
| Publisher | Vanguard | iShares |
| Expense Ratio | 0.03% | 0.04% |
| 1-Year Return (as of April 27, 2026) | 33.90% | 35.70% |
| Dividend Yield | 1.20% | 1.30% |
| Beta | 1.06 | 1.07 |
| AUM | $164.6 billion | $267.9 million |
Beta indicates price volatility relative to the S&P 500 and is derived from five years of monthly returns. The one-year return reflects the total return expected over the next 12 months. The dividend yield shown is the trailing 12-month distribution yield.
Both funds are economically priced for retail investors, but the Vanguard fund has a minor edge with an expense ratio of 0.03%. The iShares fund, however, offered a higher dividend yield over the past year, at 1.30% compared to Vanguard’s 1.20%.
Performance and Risk Comparison
| Metric | VB | ISCB |
|---|---|---|
| Maximum Drawdown (5 Years) | (28.20%) | (29.90%) |
| $1,000 Growth in 5 Years (Total Return) | $1,353 | $1,287 |
What’s Inside
The iShares Morningstar Small Cap ETF, launched in 2004, contains 1,553 holdings, primarily focusing on 18% industrial products, 16% financial services, and 14% healthcare. Significant positions include: Lumentum Holdings (Light +5.13%) at 1.03%, Revolutionary Medicine (RVMD 2.32%) at 0.41%, and Albemarle (ALB 2.03%) at 0.36%. The fund paid $0.92 per share in dividends over the past 12 months.
Similarly, the Vanguard Small Cap ETF, also established in 2004, covers 1,357 stocks and tracks the CRSP U.S. Small Cap Index. This fund’s industry allocation includes 20% in industrials, 16% in technology, and 13% in financial services. Its leading holdings are: EMCOR Group (EME 0.14%) at 0.45%, NRG Energy (NRG +4.41%) at 0.42%, and Atmos Energy (ATO +2.30%) at 0.42%. Vanguard’s dividend payout per share is $3.50 for the year.
Implications for Investors
Adding small-cap stocks to your portfolio can be a smart move for exposure to high-growth opportunities, and both the Vanguard Small Cap ETF (VB) and the iShares Morningstar Small Cap ETF (ISCB) serve this purpose well. With a broad array of holdings exceeding 1,000 and low expense ratios, choosing where to invest involves considering several key factors.
A significant portion of ISCB’s assets lie in industrial and financial services—sectors generally associated with lower volatility compared to technology. This focus might appeal to more conservative investors since small-cap stocks tend to present higher risks. Yet, ISCB’s smaller AUM relative to VB could lead to less liquidity for those actively trading.
On the other hand, VB’s substantial AUM, along with its 20% concentration in industrials, adds a layer of stability. These attributes, combined with its slightly lower costs, allow it to sustain minimal maximum drawdowns over the past five years, fostering long-term capital growth. Therefore, VB could be a strong choice for investors aiming for a buy-and-hold strategy.
