iShares Core S&P Small-Cap ETF

IJR

Market cap $109B

Small caps have been having a banner year, with the Russell 2000 outperforming the S&P 500 year-to-date. Some small-cap focused ETFs have also surpassed that benchmark.

If you hold the iShares Russell 2000 ETF (NYSEARCA:IWM), you already know it as the default small-cap ticker on every financial channel.

The Schwab U.S. Small-Cap ETF provides more affordable access to small-cap equities with an expense ratio of 0.03%. The Schwab U.S. Small-Cap ETF tracks 1,727 stocks across the small-cap segment, whereas the iShares Core S&P Small-Cap ETF holds a more concentrated portfolio of 652 companies.

IJR carries a slightly higher fee than VB. VB provides broader exposure, holding more than twice as many stocks as IJR.

The Russell 2000 has now lagged the broader market for many years. Small-cap stocks tend to perform well during periods of lower interest rates and economic expansion.

Small-cap investing used to come with a caveat. Smaller companies were cheaper, scrappier, and more leveraged.

Momentum continues to stand out as the dominant equity risk factor since the war with Iran began on Feb. 28. The iShares MSCI USA Momentum Factor ETF has soared more than 32% since the initial attacks on Iran—an extraordinary gain compared with the rest of the field.

Schwab U.S. Small-Cap ETF has a lower expense ratio of 0.04% compared to iShares Core S&P Small-Cap ETF's 0.06%. While iShares Core S&P Small-Cap ETF holds 641 stocks, Schwab U.S. Small-Cap ETF provides broader exposure with 1,706 holdings.

Inflation relentlessly erodes purchasing power, making dividend growth essential for income investors to maintain real income. A barbell strategy—combining moderate-yielding dividend growth stocks/ETFs and 6.5%+ yielding investment grade preferreds—offers both growth and current income. AI-driven capex by large-cap S&P 500 firms is powering economic growth and masking weakness among lower-income consumers.

Vanguard Small-Cap ETF has a lower expense ratio and holds a significantly larger number of stocks than iShares Core S&P Small-Cap ETF. iShares Core S&P Small-Cap ETF delivered higher total returns over the last year but Vanguard Small-Cap ETF leads in five-year growth.