Vanguard VBK vs. iShares IJT: How These Small-Cap Growth ETFs Compare on Fees, Risk, and Returns

The Vanguard Small-Cap Growth ETF (NYSEMKT:VBK) and the iShares S&P Small-Cap 600 Growth ETF (NASDAQ:IJT) both aim to capture U.S. small-cap growth stocks, offering investors exposure to fast-growing companies beyond the large-cap universe.

This comparison examines key differences in cost, performance, risk, and portfolio construction to help investors decide which fund best fits their strategy.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.

VBK is more affordable with a lower expense ratio, and it also has significantly higher assets under management (AUM). However, IJT offers a slightly higher dividend yield, which may appeal to those seeking more income from their investment.

Performance & risk comparison

What's inside

VBK tracks a broad cohort of small-cap growth stocks, holding 552 positions. The fund allocates 27% of assets to technology, 21% to industrials, and 18% to healthcare, with top holdings including Insmed, Comfort Systems USA, and SoFi Technologies. This results in a portfolio that leans more heavily into technology than some competitors and offers wide diversification, with individual holdings accounting for only a small fraction of the fund.

IJT, by contrast, contains 348 stocks and splits its assets more evenly across technology (20%), industrials (19%), and healthcare (17%). Leading positions include Arrowhead Pharmaceuticals, Armstrong World Industries, and InterDigital, giving the fund a somewhat more balanced sector exposure among growth-oriented small caps.

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What this means for investors

Small-cap stocks can have excellent growth potential, and both ETFs focus on smaller corporations with growth characteristics -- potentially leading to higher total returns over time.

Between the two funds, VBK is slightly higher risk, with a heavier tilt toward the technology industry. Tech stocks can be incredibly lucrative, but they also tend to be more volatile. VBK's higher beta and deeper max drawdown suggest this fund has experienced more significant price fluctuations over the last few years compared to IJT.

IJT has an edge with its higher dividend yield of 0.91% compared to VBK's 0.54%. For investors focused on building a source of passive income, that could be a selling point.

However, IJT also charges an expense ratio nearly double that of VBK. Investors can expect to pay $18 per year in fees for every $10,000 invested in IJT, compared to $7 per year for VBK.

When deciding where to invest, buyers will need to consider their goals with a small-cap ETF. While all small-cap stocks tend to be more volatile than large-caps, VBK has a history of larger price swings -- yet it has also outperformed IJT over the last 12 months. While IJT's reduced focus on tech stocks can increase its stability, it can also potentially limit its earning potential.

Glossary

ETF: Exchange-traded fund that holds a basket of securities and trades on an exchange like a stock.
Expense ratio: Annual fund operating costs expressed as a percentage of the fund's average assets.
Dividend yield: Annual dividends paid by a fund divided by its current share price, shown as a percentage.
Assets under management (AUM): Total market value of all assets that a fund or manager oversees.
Small-cap: Companies with relatively small stock market values, typically a few hundred million to a few billion dollars.
Growth stocks: Companies expected to grow earnings or revenue faster than the overall market, often reinvesting profits instead of paying dividends.
Max drawdown: The largest peak-to-trough decline in an investment's value over a specific period.
Beta: A measure of how much an investment's price moves relative to a benchmark index like the S&P 500.
Total return: Investment performance including price changes plus all dividends and distributions, assuming they are reinvested.
Sector allocation: How a fund's assets are divided among different industries, such as technology, healthcare, or industrials.
Diversification: Spreading investments across many securities or sectors to reduce the impact of any single holding.
Index tracking: Strategy where a fund aims to replicate the performance of a specific market index.

Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Comfort Systems USA and Vanguard Index Funds - Vanguard Small-Cap Growth ETF. The Motley Fool has a disclosure policy.