Differences in Fees, Liquidity, and Dividend Yield Highlight This Matchup of Small-Cap ETFs

While JPMorgan BetaBuilders U.S. Small Cap Equity ETF (NYSEMKT:BBSC) provides efficient exposure to small-cap stocks, the Schwab U.S. Small-Cap ETF (NYSEMKT:SCHA) offers much larger assets under management (AUM) and a rock-bottom expense ratio.

Small-cap stocks often offer higher growth potential than their large-cap peers, albeit with greater volatility and more sector-specific weightings. Investors looking for domestic small-cap exposure may compare these offerings from J.P. Morgan and Schwab, which both track U.S. small-cap indexes but differ significantly in cost, liquidity, and portfolio breadth.

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 Schwab fund is notably more affordable for long-term investors with a low expense ratio of 0.03%, compared to the 0.09% charged by the JPMorgan fund. Both ETFs currently offer a matching trailing-12-month dividend yield of 1.1%, providing modest income alongside equity exposure.

Performance & risk comparison

What's inside

Schwab U.S. Small-Cap ETF provides broad diversification through 1,753 holdings, offering broad reach across the small-cap universe. Its largest sector allocations are Financial Services (17%), Healthcare (17%), and Technology (16%). Top holdings include Bitmine Immersion Technologies (NYSE:BMNR) at 0.35%, Halozyme Therapeutics (NASDAQ:HALO) at 0.30%, and Wayfair (NYSE:W) at 0.30%. It launched in 2009. Schwab U.S. Small-Cap ETF has paid $0.37 per share over the trailing 12 months, which, on its recent ~$32.79 share price, works out to a 1.1% yield.

JPMorgan BetaBuilders U.S. Small Cap Equity ETF focuses on Technology (20%), Healthcare (18%), and Financial Services (15%). It maintains a more concentrated portfolio of 849 holdings compared to the Schwab fund. Its largest positions include Semtech (NASDAQ:SMTC) at 0.71%, Corcept Therapeutics (NASDAQ:CORT) at 0.49%, and Formfactor (NASDAQ:FORM) at 0.45%. It launched in 2020. JPMorgan BetaBuilders U.S. Small Cap Equity ETF has paid $0.91 per share over the trailing 12 months, which, on its recent ~$85.56 share price, works out to a 1.1% yield.

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Which looks like the better buy

When comparing the JPMorgan BetaBuilders U.S. Small Cap Equity ETF (BBSC) and the Schwab U.S. Small-Cap ETF (SCHA), investors should consider several key factors. Let's see what they tell us about each fund.

First, we should discuss the differing strategies of each fund. BBSC holds roughly 800 stocks across a variety of sectors, with large allocations to tech, healthcare, and financial services. SCHA, on the other hand, has around double the holdings (1,750) and includes a greater share of financial services stocks.

Two other important factors are historical performance and income potential. Over the last five years, the two funds have generated very similar returns. SCHA has generated a total return of 37%, equating to a compound annual growth rate (CAGR) of 6.5%. BBSC, meanwhile, has delivered a total return of 38%, with a CAGR of 6.7%. As for income, SCHA has a dividend yield of 1.15%, while BBSC has 1.09%, giving SCHA a slight edge.

One final factor to weigh is cost. SCHA has an expense ratio of only 0.03%, making it one of the most affordable ETFs around. BBSC also has a low expense ratio of 0.09%, which is nonetheless not as cheap as SCHA.

In summary, although BBSC and SCHA are both small-cap ETFs, SCHA has the edge in a few key categories. It has a lower expense ratio, meaning investors pay less in fees. It also has a modestly higher dividend yield, meaning investors will generate slightly more income from their shares. Lastly, it has greater liquidity, meaning investors may find it easier to transact in its shares than in BBSC.

Jake Lerch has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Corcept Therapeutics and FormFactor. The Motley Fool recommends Wayfair. The Motley Fool has a disclosure policy.