Want to Invest in Small-Cap Stocks? Check Out These Two Top ETFs
Key Points
SCHA holds a broader basket of small-cap stocks than SPSM and has outperformed over the past year.
SPSM costs slightly less and offers a marginally higher dividend yield than SCHA.
Both funds have a large exposure to the financials and industrials sectors.
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The State Street SPDR Portfolio S&P 600 Small Cap ETF (NYSEMKT:SPSM) and the Schwab U.S. Small-Cap ETF (NYSEMKT:SCHA) aim to provide diversified exposure to U.S. small-cap stocks, but they track different indexes and use distinct methodologies. The two ETFs differ most in holdings, sector emphasis, and recent performance, with SCHA offering broader diversification and a stronger one-year return, while SPSM maintains a slightly lower expense ratio and higher yield.
This comparison explores how their portfolio makeup, costs, and recent risk-return profiles may appeal to investors seeking small-cap equity exposure.
Snapshot (cost & size)
| Metric | SPSM | SCHA |
|---|---|---|
| Issuer | SPDR | Schwab |
| Expense ratio | 0.03% | 0.04% |
| 1-yr total return (as of 2026-02-20) | 18.4% | 22.3% |
| Dividend yield | 1.5% | 1.2% |
| Beta | 1.19 | 1.00 |
| AUM | $14.8 billion | $20.8 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.
SPSM edges out SCHA marginally on cost (expense ratio) and yield, offering a slightly higher payout for income-focused investors.
Performance & risk comparison
| Metric | SPSM | SCHA |
|---|---|---|
| Max drawdown (5 y) | (27.94%) | (30.79%) |
| Growth of $1,000 over 5 years | $1,244 | $1,223 |
What's inside
SCHA tracks a broad small-cap index, holding 1,724 stocks and spreading sector weights across financial services (17.9%), industrials (17.2%), and healthcare (15.8%). Its largest positions include Sandisk Corp (NASDAQ:SNDK), Lumentum Holdings Inc (NASDAQ:LITE), and ATI Inc (NYSE:ATI), with no single stock dominating. Sandisk is the largest holding at 2%. With a 16-year history and over $20 billion in assets under management (AUM), SCHA emphasizes diversification and liquidity for investors seeking comprehensive small-cap exposure.
In comparison, SPSM covers 607 stocks, with sector tilts toward industrials (18.1%), financial services (18%), and consumer discretionary (14%). Its top holdings are Solstice Adv Materials Inc (NASDAQ:SOLS), Moog Inc (NYSE:MOGA), and InterDigital Inc (NASDAQ:IDCC), each representing less than 1% of the portfolio. SPSM’s approach is more concentrated, which may result in slightly different risk and return dynamics versus SCHA’s broader reach.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Small-cap stocks offer high return potential but also carry risks and can be volatile. The key to success in small-cap investing, therefore, often boils down to an investor’s patience and appetite for risk.
Because analyzing, picking, and investing in individual small-cap stocks is not for everyone, the State Street SPDR Portfolio S&P 600 Small Cap ETF and the Schwab U.S. Small-Cap ETF are two of the most elite, low-cost ETFs to invest in small-cap stocks. The number of their holdings, however, can make a big difference.
SCHA Total Return Level data by YCharts
SCHA tracks the Dow Jones U.S. Small-Cap Total Stock Market Index, which comprises over 1,700 stocks and offers the broadest possible exposure to small-cap stocks. SPSM, comparatively, tracks the S&P SmallCap 600 Index and is more concentrated, with nearly one-third as many holdings as SCHA.
SCHA may appeal to investors with a high appetite for risk because of its large portfolio. Over the past one and three years, this ETF has also outperformed SPSM.
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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lumentum and Moog. The Motley Fool has a disclosure policy.
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