Key Points
iShares Morningstar Small-Cap ETF and Vanguard Small-Cap ETF share nearly identical expense ratios of 0.04% and 0.03%, respectively.
Vanguard Small-Cap ETF manages $182.7 billion in assets under management (AUM), making it significantly more liquid than iShares Morningstar Small-Cap ETF, which manages $277.7 million in AUM.
The iShares Morningstar Small-Cap ETF provides broader exposure with 1,544 holdings compared to the 1,357 companies in the Vanguard Small-Cap ETF portfolio.
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iShares Morningstar Small-Cap ETF (NYSEMKT:ISCB) and Vanguard Small-Cap ETF (NYSEMKT:VB) offer nearly identical low-cost exposure to small-cap stocks, though ISCB provides slightly broader diversification and a marginally higher yield.
Both funds target the small-cap segment of the U.S. market, aiming to capture the growth potential of smaller companies. While they share similar goals and price points, differences in liquidity and index methodology set these two long-running options for diversified portfolios apart.
Snapshot (cost & size)
| Metric | VB | ISCB |
|---|---|---|
| Issuer | Vanguard | iShares |
| Expense ratio | 0.03% | 0.04% |
| 1-yr return (as of June 23, 2026) | 28.00% | 29.90% |
| Dividend yield | 1.19% | 1.27% |
| Beta | 1.03 | 1.04 |
| AUM | $182.7 billion | $277.7 million |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
ISCB’s expense ratio is 0.04%, slightly higher than VB’s 0.03%. Investors in the iShares fund receive a marginally higher payout, with a 1.27% yield compared to 1.19% for the Vanguard fund.
Performance & risk comparison
| Metric | VB | ISCB |
|---|---|---|
| Max drawdown (5 yr) | (28.20%) | (29.90%) |
| Growth of $1,000 over 5 years (total return) | $1,402 | $1,332 |
What’s inside
The iShares fund targets small companies with a portfolio consisting of 1,544 holdings. Sector allocations include industrials at 18%, technology at 16%, and financial services at 16%. Its largest positions include Sterling Infrastructure (NASDAQ:STRL) at 0.45%, Okta (NASDAQ:OKTA) at 0.31%, and Roku (NASDAQ:ROKU) at 0.28%. This fund launched in 2004 and has paid $0.95 per share over the trailing 12 months.
In contrast, the Vanguard fund follows the CRSP U.S. Small Cap Index and holds 1,357 stocks. It maintains a higher tilt toward industrials at 21%, with technology at 19% and financial services at 12%. Top holdings include Flex (NASDAQ:FLEX) at 0.69%, Astera Labs (NASDAQ:ALAB) at 0.62%, and Ciena (NYSE:CIEN) at 0.51%. Also launched in 2004, the fund has a trailing-12-month dividend of $3.50 per share.
For more guidance on ETF investing, check out the full guide at this link.
Which is the better small-cap ETF?
These two funds are both excellent options for investors looking for small-cap stocks in the United States. They both have low expense ratios, similar dividend yields, and major name brands backing the ETFs. That said, there are a couple of reasons why I would lean ever-so-slightly toward choosing VB.
First, VB’s past returns have sailed past ISCB’s. Though the ETFs are fairly similar, VB has generated annualized total returns of 10% since 2004, whereas ISCB only reached 8.9%. Not a major difference, but enough to matter. Second, VB is 600 times larger than ISCB, so its massive asset base makes it much less susceptible to liquidation risk.
Lastly, VB’s relative outperformance comes with a similar beta and a slightly smaller five-year drawdown, delivering superior returns while providing a smoother ride for investors. Realistically, I don’t think investors can go wrong with either, but VB offers a few minor upgrades that have me picking it over ISCB.
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Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ciena, Okta, Roku, and Sterling Infrastructure. The Motley Fool recommends Astera Labs and Flex. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
