ISCV vs. IWN: ISCV Offers Lower Costs But IWN Provides Greater Liquidity

The iShares Russell 2000 Value ETF (NYSEMKT:IWN) charges four times the expense ratio of the iShares Morningstar Small-Cap Value ETF (NYSEMKT:ISCV), but offers broader holdings, higher recent returns, and a modest tilt toward real estate over consumer-focused sectors.

Both the iShares Morningstar Small-Cap Value ETF (ISCV) and the iShares Russell 2000 Value ETF (IWN) track U.S. small-cap value stocks, aiming to capture companies trading at lower prices relative to fundamentals. This comparison focuses on their costs, performance, liquidity, and portfolio makeup to help clarify which fund’s approach may appeal, depending on personal priorities.

Snapshot (Cost & Size)

ISCV is more affordable, charging just 0.06% in annual fees compared to IWN’s 0.24%, and also delivers a slightly higher yield, which may appeal to cost-conscious, or income-focused, investors.

Performance & Risk Comparison

What's Inside

IWN tracks a Russell index of small-cap U.S. stocks with value characteristics, holding 1,407 securities as of its 25.4-year history. Its sector allocation leans most heavily on financial services (26%), real estate (12%), and industrials (11%), with top holdings including Blk Csh Fnd Treasury Sl Agency (XTSLA) 0.99%, Echostar (NASDAQ:SATS) 0.98%, and Hecla Mining (NYSE:HL) 0.61%.

ISCV also focuses on U.S. small-cap value, but with a slightly different sector mix: financial services (21%), consumer cyclical (16%), and industrials (13%). Among its 1,101 holdings, top positions are Sandisk (NASDAQ:SNDK) 0.93%, Blk Csh Fnd Treasury Sl Agency (XTSLA) 0.89%, and Rocket Companies (NYSE:RKT) 0.60%. Neither fund introduces leverage, ESG, or other structural quirks.

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What This Means For Investors

Both of these funds share many similar characteristics, however, there are some key differences investors should consider.

For example, while both funds target small-cap stocks, there are differences in their holdings. IWN leans more heavily on the financial sector, with 26% of its overall holdings in that industry. ISCV, by comparison, has only 21% of its total holdings in the financial sector.

Another key difference is cost. IWN has an expense ratio of 0.24%. That isn't bad, but ISCV boasts a much lower expense ratio of 0.06%. To put this in context, someone who invests $10,000 in IWN would expect to pay $24 in annual fees; the same investor would pay $6 in annual fees for $10,000 worth of ISCV shares.

Granted, this amount isn't earth-shattering, but for cost-conscious investors it can make it difference.

Finally, there are two other key points of divergence: dividend yield and liquidity.

ISCV offers a slightly higher dividend yield at 2.0% versus 1.7% for IWN -- making ISCV a better choice for those seeking income from their investment. As for liquidity, IWN has over $12 billion in assets under management. ISCV, by contrast, has about $600 million. While $600 million should provide ample liquidity for investors to trade in and out of shares, it is near a level where bid-ask spreads could begin to widen, particularly during a correction or bear market. Therefore, investors concerned with liquidity risk might be wise to select IWN.

Glossary

Expense ratio: The annual fee, as a percentage of assets, that a fund charges to cover operating costs.
Dividend yield: The annual dividends paid by a fund, expressed as a percentage of its current price.
Total return: The investment's price change plus all dividends and distributions, assuming those payouts are reinvested.
Max drawdown: The largest percentage drop from a fund's peak value to its lowest point over a specific period.
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 all assets managed by a fund.
Small-cap: Refers to companies with relatively small market capitalizations, often between $300 million and $2 billion.
Value stocks: Stocks considered undervalued based on financial metrics like earnings, sales, or book value.
Consumer cyclical: Sector including companies whose sales are sensitive to economic cycles, like retailers, or automakers.
Securities: Financial instruments that can be traded, such as stocks, bonds, or ETFs.
Leverage: The use of borrowed money to increase potential investment returns, or losses.

Jake Lerch 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.