Small-Cap ETFs: SCHA Owns the Whole Neighborhood, IJR Checks the Financials First
Key Points
Schwab U.S. Small-Cap ETF charges a lower expense ratio, but iShares Core S&P Small-Cap ETF pays a slightly higher dividend yield.
IJR holds fewer stocks and tilts a bit more toward financial services, while SCHA leans on technology.
SCHA has delivered stronger one-year performance, but IJR has experienced a slightly smaller drawdown over five years.
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The Schwab U.S. Small-Cap ETF (NYSEMKT:SCHA) stands out for its lower expense ratio and broader stock coverage, while the iShares Core S&P Small-Cap ETF (NYSEMKT:IJR) offers a marginally higher yield and a narrower focus on financial services and industrials.
Both SCHA and IJR aim to capture the U.S. small-cap space, but they differ in cost, sector composition, and number of holdings. This comparison looks at recent performance, risk, and portfolio makeup to help investors weigh which approach may better suit their goals.
Snapshot (cost & size)
| Metric | SCHA | IJR |
|---|---|---|
| Issuer | Schwab | iShares |
| Expense ratio | 0.04% | 0.06% |
| 1-yr return (as of 2026-03-11) | 25.3% | 18.9% |
| Dividend yield | 1.2% | 1.4% |
| Beta | 1.3 | 1.2 |
| AUM | $20.1 billion | $92.2 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months.
SCHA is slightly more affordable than IJR, with a 0.04% expense ratio versus 0.06%, and IJR pays a modestly higher dividend yield at 1.4% compared to SCHA’s 1.2%.
Performance & risk comparison
| Metric | SCHA | IJR |
|---|---|---|
| Max drawdown (5 y) | (30.79%) | (28.02%) |
| Growth of $1,000 over 5 years | $1,125 | $1,083 |
What's inside
IJR tracks a well-known S&P index and holds 649 U.S. small-cap stocks, with its largest weights in financial services (17%), industrials (16%), and consumer cyclicals (15%). Its top holdings are Solstice Advanced Materials (NASDAQ:SOLS), Interdigital (NASDAQ:IDCC), and Moog Inc Class A (MOG-A), each making up less than 1% of the fund, and it has an established track record with 25.8 years since inception.
SCHA, by contrast, casts a wider net with 1,720 holdings and a tilt toward technology (18%), industrials (16%), and financial services (16%). Its largest positions are Sandisk (NASDAQ:SNDK), Lumentum Holdings (NASDAQ:LITE), and ATI (NYSE:ATI), with none exceeding 2.22% of assets. Both funds avoid sector or ESG quirks, but SCHA offers broader diversification by stock count.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Small-cap ETFs like these give you exposure to younger companies that haven't yet grown into household names. These businesses offer something large corporations can't: the potential to multiply in value as they grow. But that upside comes with real turbulence, thinner financial cushions, and sharper drops during economic downturns. This is territory for patient investors with long time horizons and the stomach to ride out serious volatility.
Both SCHA and IJR deliver broad small-cap exposure at rock-bottom cost, but their indexes approach this universe differently. SCHA casts an enormous net across virtually the entire small-cap market with no filter beyond size. IJR holds around 600 stocks drawn from the S&P SmallCap 600, which screens companies for profitability before admission. That quality gate matters. IJR systematically excludes money-losing companies that SCHA freely includes.
SCHA is worth considering for investors who want maximum small-cap breadth and believe spreading bets across the entire market beats any quality filter. IJR is the stronger choice for those who want small-cap growth potential with a built-in guardrail against the most financially fragile companies, making it the better fit for investors who want the small-cap opportunity without owning every speculative long shot in the market.
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Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lumentum and iShares Core S&P Small-Cap ETF. The Motley Fool has a disclosure policy.
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