Small Cap ETFs: VB Boasts Lower Fees, While ISCB Sports a Higher Dividend Yield

Key Points

The iShares Morningstar Small-Cap ETF ((NYSEMKT:ISCB)) and Vanguard Small-Cap ETF ((NYSEMKT:VB)) both offer broad U.S. small-cap exposure, but ISCB delivered stronger recent returns and holds more names, while VB is far larger, more liquid, and a touch less volatile.

Both the iShares Morningstar Small-Cap ETF and Vanguard Small-Cap ETF aim to track the U.S. small-cap segment, providing investors with diversified access to hundreds of smaller companies. This comparison looks at how ISCB’s portfolio and risk profile stack up against the widely used, ultra-low-cost VB, helping investors spot the key differences between these two options.

Snapshot (Cost & Size)

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

Both funds are extremely affordable, charging near-identical expense ratios, while their dividend yields are also matched, making cost and income less of a differentiator in this case.

Performance & Risk Comparison

What’s Inside

ISCB tracks a broad universe of U.S. small-cap stocks, holding 1,568 companies as of its most recent update, and has been in operation for over 21 years. The fund’s sector mix leans 19% Industrials, 16% Technology, and 15% Financial Services, with top positions in Lumentum Holdings Inc (NASDAQ:LITE), Albemarle Corp (NYSE:ALB), and Exact Sciences Corp (NASDAQ:EXAS). No leverage, currency hedging, or ESG overlays are present.

VB also offers diversified small-cap exposure, with a similar sector balance but a slightly higher Technology allocation at 17%. Its largest holdings include Rocket Lab Corp (NASDAQ:RKLB), Sandisk Corp (NASDAQ:SNDK), and Ciena Corp (NYSE:CIEN). VB’s much greater assets under management (AUM) and trading volume may make it easier for investors to enter or exit large positions efficiently.

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What This Means For Investors

The iShares Morningstar Small-Cap ETF (ISCB) and Vanguard Small-Cap ETF (VB) are both exchange-traded funds (ETFs) that focus on the small cap sector. Here’s what investors need to know about these two ETFs.

For starters, ISCB and VB offer many similar characteristics. Take fees, for example. Both funds offer very attractive expense ratios. ISCB has an expense ratio of 0.04% and VB’s expense ratio is 0.03%. That means investors can expect to pay $4 or $3, respectively, in annual fees for every $10,000 investment. In addition, the funds’ dividend yields are also nearly identical. ISCB’s dividend yield is 1.31%; VB’s dividend yield is 1.26%.

Turning to performance, both funds have recorded similar returns, with VB taking a slight edge. Over the last five years, VB has generated a total return of 36%, equating to a compound annual growth rate (CAGR) of 6.4%. ISCB, meanwhile, has advanced by 34%, with a CAGR of 6.0%.

In summary, these two ETFs are quite similar in many key respects. For extremely cost-conscious investors, VB’s lower expense ratio may prove more desirable.

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Jake Lerch has positions in Exact Sciences and Rocket Lab and has the following options: long December 2026 $30 puts on Rocket Lab. The Motley Fool has positions in and recommends Ciena, Rocket Lab, and Vanguard Index Funds – Vanguard Small-Cap ETF. The Motley Fool recommends Lumentum. The Motley Fool has a disclosure policy.