Which Small-Cap Value ETF Is the Better Buy: iShares’ ISCV or State Street’s SLYV?

The iShares Morningstar Small-Cap Value ETF (NYSEMKT:ISCV) offers a broader portfolio and lower fees, while the State Street SPDR S&P 600 Small Cap Value ETF (NYSEMKT:SLYV) provides a more concentrated play on S&P-vetted small-cap value stocks.

Both funds target the value factor within the small-cap universe, searching for companies that trade at low prices relative to their book value, earnings, and sales. While they share a goal, their underlying indices and cost structures create distinct profiles for investors seeking small-company exposure.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The iShares fund is the more affordable option, charging just 0.06% compared to the 0.15% fee for the State Street fund. Payouts are nearly identical, with only a small gap between the two funds in trailing dividend yields.

Performance & risk comparison

What's inside

iShares Morningstar Small-Cap Value ETF casts a wide net with 1,039 holdings. Financials lead its sector allocation at 24%, with consumer discretionary at 13%, and industrials at 12%. Its largest positions include Skyworks Solutions (NASDAQ:SWKS) at 0.64%, Best Buy (NYSE:BBY) at 0.64%, and Hf Sinclair (NYSE:DINO) at 0.58%. It was launched in 2004. The fund has paid $1.49 per share over the trailing 12 months, which on its recent ~$77.59 share price works out to a 1.9% yield.

State Street SPDR S&P 600 Small Cap Value ETF is more selective, tracking 464 stocks from the S&P SmallCap 600 Value Index. Its sector mix leans toward financial services at 21%, industrials at 15%, and consumer cyclical at 15%. Top holdings include Paycom Software (NYSE:PAYC) at 1.15%, Match Group (NASDAQ:MTCH) at 1.14%, and Sm Energy Co (NYSE:SM) at 1.04%. It was launched in 2000. The fund has paid $2.05 per share over the trailing 12 months, which on its recent ~$104.79 share price works out to a 2% yield.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy

Small-cap value investing is one of the oldest and most debated strategies in finance. The idea is simple: smaller companies trading at cheap prices have historically outperformed the broader market over long periods. The catch is that the ride is bumpy, and not every cheap small-cap stock is cheap for a good reason. Some are struggling businesses that never recover.

That tension is exactly what separates ISCV and SLYV. SLYV's S&P 600 foundation requires companies to demonstrate profitability before they qualify for inclusion, which acts as a quality filter against the weakest names. ISCV includes unprofitable companies in its Morningstar index, but spreads risk across more than twice as many holdings at less than half the annual cost.

Over five years, ISCV has delivered stronger total returns and shallower drawdowns despite owning riskier names, a reminder that low fees compound just as reliably as good stock picks. SLYV's profitability screen and deeper liquidity are a good fit for investors who want quality guardrails built into their small-cap exposure and are comfortable paying a modest premium for them.

Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Best Buy and Paycom Software. The Motley Fool recommends Match Group and Skyworks Solutions. The Motley Fool has a disclosure policy.