IWN vs. ISCV: Which Small-Cap ETF Is the Best Choice for Investors?

The iShares Morningstar Small-Cap Value ETF (NYSEMKT:ISCV) and the iShares Russell 2000 Value ETF (NYSEMKT:IWN) both aim to provide diversified exposure to U.S. small-cap value stocks, but they differ in index methodology, cost, liquidity, and sector emphasis.

This comparison highlights each fund’s profile to help clarify which may appeal more, depending on individual preferences around fees, tradability, and portfolio makeup.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.

ISCV offers both a lower expense ratio and slightly higher dividend yield, making it more cost-effective for fee- and income-focused investors.

Performance & risk comparison

What's inside

IWN tracks a broad index of U.S. small-cap value stocks, with 1,419 holdings. Its sector mix leans heavily toward financial services (making up 26% of total assets), real estate (12%), and industrials (11%). It has top positions in EchoStar, Hecla Mining Company, and Oklo. Each of the top holdings accounts for less than 1% of assets, which helps mitigate single-stock risk.

ISCV also targets small-cap value but with a slightly different sector tilt. Financials makes up 21% of the fund, followed by consumer cyclical (15%), and industrials (13%). It holds 1,092 stocks, and its largest allocations include Sandisk, Rocket Companies, and Annaly Capital Management -- each of which accounts for less than 1% of total assets. Both ETFs avoid leverage and other structural quirks, focusing on broad, diversified exposure.

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

What this means for investors

ISCV and IWN both maintain large portfolios of small-cap stocks. With over 1,000 holdings in each fund, investors can expect well-diversified exposure to the small-cap value segment with either of these ETFs. Where they differ comes down to sector mix, fees, income, and liquidity.

Both ETFs are primarily focused on stocks in the financials industry. However, IWN leans more toward real estate, while ISCV is more heavily allocated toward consumer cyclical stocks. For investors who have a preference on industry exposure, this could be a deciding factor between the two ETFs.

Their significant fee difference could also influence your decision between the two. ISCV charges a 0.06% expense ratio. meaning investors will pay $6 per year in fees for every $10,000 invested -- compared to $24 per year with IWN. ISCV also offers a slightly higher dividend yield (1.89% compared to 1.57%), which could add up over time, especially for investors with larger account balances.

In terms of performance, the funds are fairly similar. IWN has outperformed ISCV over the last 12 months while slightly underperforming over the last five years. With similar betas and max drawdowns, the two funds have experienced roughly the same levels of risk and volatility.

Finally, their difference in liquidity could be something for investors to consider. IWN offers a much larger assets under management (AUM), which can make it easier for investors to buy and sell large amounts without affecting the ETF's price. AUM may not matter for everyone, but IWN's increased liquidity could be a selling point for some investors.

Glossary

ETF: Exchange-traded fund; a fund that trades like a stock and holds a basket of securities.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges its investors.
Dividend yield: Annual dividends paid by a fund, expressed as a percentage of its current price.
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.
Small-cap: Refers to companies with relatively small total market capitalizations, typically between $300 million and $2 billion.
Value stocks: Stocks considered undervalued based on financial metrics, often trading below their intrinsic value.
Index methodology: The rules and criteria used to select and weight securities within an index tracked by a fund.
Sector tilt: When a fund allocates a higher percentage of assets to certain industries or sectors.
Single-stock risk: The risk associated with holding a large portion of assets in one company.
Total return: The investment's price change plus all dividends and distributions, assuming those payouts are reinvested.

Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Rocket Companies. The Motley Fool has a disclosure policy.