Investing in Small-Cap ETFs: ISCG's Lower Fees or SLYG's Higher Dividend?
Key Points
ISCG charges a lower expense ratio but has a slightly lower dividend yield than SLYG.
ISCG posted a much higher one-year return but experienced a notably deeper five-year drawdown.
ISCG holds nearly three times as many stocks, tilting more toward industrials than SLYG.
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The State Street SPDR S&P 600 Small Cap Growth ETF (NYSEMKT:SLYG) and the iShares Morningstar Small-Cap Growth ETF (NYSEMKT:ISCG) differ in cost, portfolio breadth, and historical drawdowns, with ISCG offering lower fees and broader industrial exposure but showing higher volatility over time.
Both SLYG and ISCG target U.S. small-cap growth stocks, but each takes a distinct approach to sector weighting, holdings count, and recent performance. This comparison looks at cost, risk, returns, and portfolio construction to help investors decide which fund may better fit their preferences.
Snapshot (cost & size)
| Metric | SLYG | ISCG |
|---|---|---|
| Issuer | SPDR | IShares |
| Expense ratio | 0.15% | 0.06% |
| 1-yr return (as of 1/9/2026) | 8.96% | 18.02% |
| Dividend yield | 0.86% | 0.61% |
| AUM | $3.6 billion | $807.86 million |
he 1-yr return represents total return over the trailing 12 months.
ISCG is more affordable on fees, charging less than half the annual expense ratio of SLYG, but SLYG pays a slightly higher dividend yield. Investors focused on minimizing costs may prefer ISCG, while those seeking a modestly higher payout might look to SLYG.
Performance & risk comparison
| Metric | SLYG | ISCG |
|---|---|---|
| Max drawdown (5 y) | -29.17% | -41.49% |
| Growth of $1,000 over 5 years | $1,210 | $1,095 |
What's inside
ISCG tracks a broad basket of 971 U.S. small-cap growth stocks, with sector weights led by industrials (26%), technology (18%), and healthcare (17%). Its largest holdings, such as Lumentum Holdings, Kratos Defense and Security Solutions, and ATI, each make up less than 1% of the fund. With over two decades of history, ISCG offers broad diversification across small-cap growth companies, and no notable quirks or unusual constraints.
SLYG, by contrast, holds 334 stocks with a sector tilt toward industrials (20.5%), technology (19%), and healthcare (16%). Top positions include TTM Technologies, Advanced Energy Industries, and Sanmina. SLYG’s approach is more concentrated, and it tracks the S&P SmallCap 600 Growth Index, focusing on firms with strong sales growth, earnings momentum, and price strength.
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What this means for investors
Investing in small-cap exchange-traded funds (ETFs) is a good way to get exposure to a broad universe of small-cap stocks, and is generally considered a solid approach to diversifying your portfolio. Small-cap stocks — generally considered to be stocks with market caps between $250 million and $2 billion — tend to be more volatile than their large-cap peers, featuring more risk but also greater upside potential.
In this comparison, ISCG stands out for its broader total portfolio (though it has fewer total assets under management than SLYG) and its heavier bent toward industrials stocks. It also features a much lower expense ratio than SLYG, but misses slightly in the dividend matchup. Over the past five years, it’s returned slightly less and sports a much more extreme maximum drawdown of more than 40%.
Both small-cap ETFs aim to hold stocks that feature growth characteristics, which makes sense for investors who are looking at this sector of the market. Those who value dividend yield may be swayed more by SLYG, though some of those gains may be offset by the ETF’s slightly higher expense ratio.
Glossary
ETF: Exchange-traded fund that holds a basket of securities and trades on an exchange like a stock.
Expense ratio: Annual fee, expressed as a percentage of assets, that investors pay to own a fund.
Dividend yield: Annual dividends paid by a fund or stock divided by its current share price.
Beta: Measure of an investment’s volatility compared with the overall market, typically the S&P 500 index.
AUM: Assets under management; the total market value of all assets held in a fund.
Max drawdown: Largest peak-to-trough decline in an investment’s value over a specified period.
Growth of $1,000: Illustration showing how a $1,000 investment would have changed in value over time.
Small-cap: Companies with relatively small total market value, typically a few hundred million to a few billion dollars.
Growth stocks: Companies expected to grow earnings or revenue faster than the overall market, often reinvesting profits.
Sector weighting: The percentage of a fund’s assets invested in each industry or sector.
Holdings count: The number of individual securities owned within a fund’s portfolio.
Index tracking: Strategy where a fund aims to replicate the performance of a specific market index.
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Sarah Sidlow has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Kratos Defense & Security Solutions. The Motley Fool recommends Lumentum. The Motley Fool has a disclosure policy.
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