Small-Cap Showdown: IJR's $88 Billion in Assets vs. ISCB's 1,539-Stock Portfolio

The iShares Morningstar Small-Cap ETF (NYSEMKT:ISCB) and iShares Core SP Small-Cap ETF (NYSEMKT:IJR) both target U.S. small-cap stocks, but differ on costs, diversification, and income, with ISCB leaning on broader exposure and IJR offering a higher yield.

Both funds aim to capture the performance of U.S. small-cap equities, but iShares Core SP Small-Cap ETF is a core holding for many investors, while iShares Morningstar Small-Cap ETF takes a slightly different approach with a broader portfolio. Here’s how these two compare across cost, performance, risk, and portfolio makeup.

Snapshot (cost & size)

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.

ISCB is marginally more affordable on fees, charging 0.04% versus IJR’s 0.06% expense ratio, but IJR offers a higher dividend yield at 1.9% compared to ISCB’s 1.2% -- a meaningful difference for income-focused investors.

Performance & risk comparison

What's inside

iShares Morningstar Small-Cap ETF casts a wide net with 1,539 holdings, offering exposure across industrials (19%), technology (16%), and financial services (15%). Its largest positions -- Ciena (NYSE:CIEN), Coherent (NYSE:COHR), and Rocket Lab (NASDAQ:RKLB) -- each account for less than 1% of assets, reflecting a very diversified approach. The fund has a track record of 21.5 years, and no notable quirks or specialized strategies.

iShares Core SP Small-Cap ETF, by contrast, holds 635 names, with the biggest sector weights in financial services, industrials, and technology. Its top holdings include Hecla Mining (NYSE:HL), Spx Technologies (NYSE:SPXC), and Dycom Industries (NYSE:DY) all with similarly small weightings. Both funds stick closely to mainstream U.S. small-cap exposure, but IJR’s larger size and higher yield may appeal to those prioritizing income and liquidity.

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What this means for investors

IJR and ISCB both offer access to U.S. small-cap stocks, but they take notably different approaches to capturing this segment of the market.

IJR manages a massive $88 billion in assets with daily trading volume averaging over 6 million shares, making it one of the most liquid small-cap ETFs available. ISCB, by contrast, holds just $257 million in assets with far lighter trading volume. For investors who prioritize easy entry and exit or plan to make large trades, IJR's liquidity advantage is substantial.

However, ISCB brings compelling benefits of its own. It charges just 0.04% compared to IJR's 0.06% expense ratio, and its 1,539 holdings provide significantly broader diversification across the small-cap universe. ISCB's wider net means reduced concentration risk, though both funds maintain similar sector allocations across industrials, financials, and technology.

Investors seeking maximum liquidity and the confidence that comes with massive fund size should favor IJR. Those prioritizing rock-bottom costs and the widest possible small-cap diversification might prefer ISCB, provided they're comfortable with lower trading volumes.

Glossary

ETF: Exchange-traded fund; a basket of securities traded on an exchange like a stock.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges its shareholders.
Dividend yield: Annual dividends paid by a fund divided by its current price, expressed as a percentage.
Beta: A measure of a fund's volatility compared to the overall market, typically the S&P 500.
AUM: Assets under management; the total market value of assets a fund manages.
Max drawdown: The largest percentage drop from a fund's peak value to its lowest point over a period.
Holdings: The individual stocks or securities owned within a fund or portfolio.
Diversification: Spreading investments across various assets to reduce risk.
Liquidity: How easily a fund or security can be bought or sold without affecting its price.
Sector weights: The percentage of a fund's assets allocated to specific industry sectors.
Total return: The investment's price change plus all dividends and distributions, assuming those payouts are reinvested.

Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Coherent, Rocket Lab, and iShares Trust - iShares Core S&P Small-Cap ETF. The Motley Fool has a disclosure policy.