VB vs. SCHA: Which Small-Cap ETF Is the Better Buy for Investors?

Choosing between the Vanguard Small-Cap ETF (NYSEMKT:VB) and the Schwab U.S. Small-Cap ETF (NYSEMKT:SCHA)comes down to weighing VB’s slightly steadier historical performance against SCHA’s recent outperformance.

Both funds serve as low-cost vehicles for investors seeking exposure to small-cap equities. However, each ETF tracks a different underlying index, and due to different schedules for index reconstitution, VB currently has an oversized allocation to a single stock.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

These two funds are among the most affordable in their category, each carrying a 0.03% expense ratio. VB pays a slightly higher dividend, with a 1.21% yield compared to SCHA’s 1.1%

Performance & risk comparison

What's inside

Launched in 2004, VB tracks the CRSP US Small Cap Index and holds 1,310 stocks. Its top sector weightings include industrials at 20.6%, technology at 19.4%, and financial services at 12.3%. The fund's largest positions include Flex (NASDAQ:FLEX) at 0.7%, Astera Labs (NASDAQ:ALAB) at 0.6%, and Ciena (NYSE:CIEN) at 0.5%.

SCHA tracks the Dow Jones U.S. Small-Cap Total Stock Market Index and holds 1,722 stocks. Its largest sector weightings include technology at 23.2%, indsutrials at 15.5%, and healthcare at 15.4%. The fund’s top holdings include Sandisk (NASDAQ:SNDK) at 6.0%, Lumentum Holdings (NASDAQ:LITE) at 1.3%, and Revolution Medicines (NASDAQ:RVMD) at 0.8%. SCHA was launched in 2009.

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

What this means for investors

At first glance, VB and SCHA look very similar -- offering broad small-cap exposure with index-tracking strategies and rock-bottom fees. But the details tell the fuller story. Most notably, SCHA carries a large stake in Sandisk, which helps explain the fund’s stronger recent returns given the semiconductor sector's incredible run over the past year.

Sandisk was spun off from Western Digital (NASDAQ:WDC) in early 2025 as a small-cap stock, and AI-driven demand for memory chips has since sent shares up more than 30-fold over the past year alone. That surge has ballooned Sandisk's weight inside SCHA to roughly 6% -- a big driver of the fund’s recent outperformance. VB, by contrast, doesn't count Sandisk among its holdings, which suggests VB’s underlying index has already reclassified the stock into a larger-cap category.

This isn't a case of SCHA being designed to hold more concentrated positions -- it comes down to timing. VB's and SCHA's underlying indexes reconstitute on different schedules, so a stock that grows quickly can sit inside one fund longer before getting bumped up to mid- or large-cap status. Worth noting: Sandisk's market cap has now climbed to roughly $238 billion, squarely in mega-cap territory, so it will certainly be dropped from SCHA's small-cap benchmark at the next reconstitution. When that happens, SCHA's outsized exposure to the stock -- and the boost it's given returns -- will come to an end.

For investors, the takeaway is practical: a top holding near 6% -- even in a diversified small-cap fund -- means a chunk of your return depends on one company's fortunes. Investors who are comfortable with that type of exposure may prefer SCHA. Those who'd rather not have any single stock impact their results may lean toward VB's flatter, more evenly-weighted approach.

Andy Gould has positions in Lumentum. The Motley Fool has positions in and recommends Ciena, Lumentum, and Western Digital. The Motley Fool recommends Astera Labs and Flex. The Motley Fool has a disclosure policy.