SPSM Offers Lower Costs and Higher Yield Than ISCB
Key Points
SPSM costs slightly less and offers a marginally higher dividend yield than ISCB
ISCB holds more than twice as many small-cap stocks, but recent 1-year and 5-year returns are similar
Liquidity is similar for SPSM and ISCB, while both funds have similar sector weights and no notable quirks
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The State Street SPDR Portfolio S&P 600 Small Cap ETF (NYSEMKT:SPSM) carries a lower expense ratio and higher assets under management than the iShares Morningstar Small-Cap ETF (NYSEMKT:ISCB), while ISCB offers greater diversification by number of holdings and a slightly higher risk profile.
Both SPSM and ISCB aim to deliver broad exposure to U.S. small-cap stocks, but they differ in their approach, portfolio depth, and trading characteristics. This comparison looks at how each ETF stacks up on cost, returns, risk, portfolio composition, and practical trading considerations.
Snapshot (cost & size)
| Metric | SPSM | ISCB |
|---|---|---|
| Issuer | SPDR | IShares |
| Expense ratio | 0.03% | 0.04% |
| 1-yr return (as of 2026-04-24) | 40.6% | 37.9% |
| Dividend yield | 1.45% | 1.30% |
| AUM | $15.1 billion | $267.5 million |
The 1-yr return represents price appreciation plus dividends over the trailing 12 months.
SPSM is slightly more affordable with a 0.03% expense ratio compared to ISCB’s 0.04%, and it also delivers a marginally higher dividend yield at 1.45% versus 1.30%, making it a touch more attractive on cost and income grounds.
Performance & risk comparison
| Metric | SPSM | ISCB |
|---|---|---|
| Max drawdown (5 y) | -27.95% | -29.94% |
| Growth of $1,000 over 5 years | $1,328 | $1,305 |
What's inside
ISCB seeks to capture the U.S. small-cap universe with a particularly broad approach, holding 1,554 stocks that tilt toward industrials (18%), financial services (16%), and healthcare (14%). Its largest positions are Lumentum Holdings Inc (NASDAQ:LITE) at 1.02%, Revolution Medicines Inc (NASDAQ:RVMD) at 0.43%, and Albemarle Corp (NYSE:ALB) at 0.37%. With more than two decades of history, ISCB offers a long track record but comparatively low assets under management.
SPSM, by contrast, focuses on the S&P SmallCap 600 Index and holds 607 companies, with sector weights of 17% in industrials, 17% in financial services, and 16% in technology. Its top holdings—Formfactor Inc (NASDAQ:FORM), Viavi Solutions Inc (NASDAQ:VIAV), and Semtech Corp (NASDAQ:SMTC)—are each less than 1% of the fund, showing a diversified approach with no significant concentration risk. Both funds avoid leverage, currency hedges, or ESG screens.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
The thing to remember about small-cap indexes is that their best stocks always grow their market caps to a level that pushes them out when investors would rather hold on.
If you’re still interested in buying shares of a small-cap ETF, it’s hard to go wrong with either the State Street SPDR Portfolio S&P 600 Small Cap ETF (SPSM) or the iShares Morningstar Small-Cap ETF (ISCB). Over time, it looks like SPSM’s lower expense ratio leads to slightly higher returns. Over the past five years, the SPSM ETF delivered a 33.07% total return while the ISCB ETF produced a 30.04% total return.
These two small-cap ETFs produced similar returns over the long run despite following different indexes. The ISCB ETF tracks the Morningstar U.S. Small Cap Extended Index, which includes stocks with market caps between the 90th and 99.5th percentiles of the investable universe. The SPSM ETF tracks the S&P SmallCap 600 Index, which is designed to track companies that meet liquidity and other financial benchmarks.
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lumentum and Viavi Solutions. The Motley Fool has a disclosure policy.
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