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We researched and selected the best small-cap ETFs to buy for 2022.
Best Small-Cap ETFs: Overview
Here’s a quick look that the best small-cap ETFs:
- Schwab U.S. Small-Cap ETF (SCHA)
- Vanguard Small Cap Value ETF (VBR)
- Vanguard Small Cap Growth ETF (VBK)
- iShares Russell 2000 Growth ETF (IWO)
- Vanguard S&P Small-Cap 600 ETF (VIOO)
- Avantis International Small Cap Value ETF (AVDV)
The Schwab U.S. Small-Cap ETF (SCHA) and the Vanguard S&P Small-Cap 600 ETF (VIOO) are broad-based small-cap exposure.
The Vanguard Small Cap Value ETF (VBR), Vanguard Small Cap Growth ETF (VBK), and iShares Russell 2000 Growth ETF (IWO) provide access to a specific style of small-caps.
And the Avantis International Small Cap Value ETF (AVDV) enables international, ex-US exposure to small-cap equities.
Next, we’ll review each of these small-cap ETFs in more detail.
Best Small-Cap ETFs
#1. Schwab U.S. Small-Cap ETF (SCHA)
- 1-Year Performance: -7.77%
- Expense Ratio: 0.04%
- Annual Dividend Yield: 0.95%
- AUM: $16.18 billion
- 3 Month Avg. Volume: 647,183
- Number of Holdings: 1802
- Inception Date: 2009
The Schwab U.S. Small-Cap ETF tracks the total returns of the Dow Jones U.S. Small-Cap Total Stock Market Index.
The top five sectors of SCHA and their corresponding weightings are as follows: Industrials (17%), Financials (16%), Information Technology (15%), Health Care (15%), and Consumer Discretionary (13%).
The remaining six sectors receive an allocation between 2% and 7%.
SCHA is the most diversified small-cap ETF on our list in terms of style. The 1,800 stocks are a healthy mix of growth and value.
Additionally, the 0.04% expense ratio is about as good as it gets for ETFs, making it suitable for long-term investors.
Please note the Vanguard equivalent of SCHA is the Vanguard Small Cap ETF (VB). They are nearly identical in construction and objective.
SCHA Top Holdings:
- ZoomInfo Technologies (ZI) 0.44%
- LPL Financial Holdings (LPLA) 0.38%
- Alcoa Corporation (AA) 0.34%
- Builders FirstSource (BLDR) 0.34%
- Life Storage (LSI) 0.28%
#2. Vanguard Small Cap Value ETF (VBR)
- 1-Year Performance: +9.07%
- Expense Ratio: 0.07%
- Annual Dividend Yield: 1.53%
- AUM: $27.06 billion
- 3 Month Avg. Volume: 637,730
- Number of Holdings: 998
- Inception Date: 2004
The Vanguard Small Cap Value ETF invests in U.S. small-cap stocks in the value segment of the market.
It passively tracks the CRSP US Small Cap Value Index, which consists of 998 value-oriented equities mostly in the Financials (22%), Industrials (21%), and Consumer Discretionary (15%) sectors of the economy.
In typical Vanguard fashion, the fund charges a low-cost fee of just 0.07%. This means that 0.07% of the amount you invest will be paid to Vanguard each year.
VBR is the largest small-cap ETF on our list, with over $27 billion in assets.
Its 1.53% dividend yieldis also the highest.
VBR is one of the most popular Vanguard ETFs on the market.
VBR Top Holdings:
- Diamondback Energy (FANG) 0.61%
- Signature Bank (SBNY) 0.61%
- VICI Properties (VICI) 0.59%
- MOlina Healthcare (MOH) 0.58%
- IDEX Corporation (IEX) 0.56%
- Nuance Communications (NUAN) 0.55%
#3. Vanguard Small Cap Growth ETF (VBK)
- 1-Year Performance: -17.99%
- Expense Ratio: 0.07%
- Annual Dividend Yield: 0.38%
- AUM: $14.63 billion
- 3 Month Avg. Volume: 360,903
- Number of Holdings: 761
- Inception Date: 2004
The Vanguard Small Cap Growth ETF consists of 761 small-cap stocks in the growth segment of the market.
As you might expect, the holdings in this ETF trade at higher multiples than those in the Vanguard Small Cap Value ETF.
Most of these equities are in the Technology (22%) and Health Care (21%) industries.
Generally speaking, you can expect the growth version of the small-cap ETF to be more volatile than the value version from above.
Tech stocks are typically more volatile in general – let alone small-cap tech.
These are small, sometimes unprofitable, companies that are creating technologies to rival those made by the likes of Google, Microsoft, and Apple. Their efforts will not always materialize.
VBK’s turnover rate reflects this reality. About 16% of its holdings were swapped out in the last year, compared to 8% from its value counterpart.
Consider the general Vanguard Small Cap ETF (VB) if you’d like to combine VBR and VBK.
VBK Top Holdings:
- Bio-Techne Corporation (TECH) 0.85%
- Entegris (ENTG) 0.79%
- Trex Company (TREX) 0.65%
- Coterra Energy (CTRA) 0.65%
- Equity LifeStyle Properties (ELS) 0.61%
#4. iShares Russell 2000 Growth ETF (IWO)
- 1-Year Performance: -22.99%
- Expense Ratio: 0.24%
- Annual Dividend Yield: 0.30%
- AUM: $10.46 billion
- 3 Month Avg. Volume: 933,027
- Number of Holdings: 1243
- Inception Date: 2000
The iShares Russell 2000 Growth ETF invests in small public U.S. companies whose earnings are expected to grow above average relative to the market.
Given IWO’s similar objective as the Vanguard Small Cap Growth ETF (VBK), we will use this section to compare the two funds in more detail.
For starters, their tracking of different indices results in IWO having about twice as many stocks in its fund, a total of 1,243 compared to 761.
Technology and Health Care are the primary industries in each fund, accounting for a combined 50% of IWO assets and 40% of VBK assets.
The aggregate fundamentals of each fund are also similar. Both have price-to-earnings ratios in the low 30s and price-to-book ratios around 5x.
In addition to the number of holdings, perhaps the main difference between IWO and VBK is their expense ratios.
IWO collects 0.24% of invested assets, while VBK collects just 0.07%.
This is a material disparity for buy-and-hold investors with multi-decade time horizons.
IWO Top Holdings:
- Synaptics (SYNA) 0.66%
- WillScot Mobile Mini Holdings (WSC) 0.62%
- Lattice Semiconductor (LSCC) 0.61%
- Tetra Tech (TTEK) 0.61%
- EastGroup Properties (EGP) 0.60%
#5. Vanguard S&P Small-Cap 600 ETF (VIOO)
- 1-Year Performance: +1.23%
- Expense Ratio: 0.10%
- Annual Dividend Yield: 0.83%
- AUM: $1.99 billion
- 3 Month Avg. Volume: 61,189
- Number of Holdings: 607
- Inception Date: 2010
The Vanguard S&P Small-Cap 600 ETF exposes small-cap equities diversified across growth and value styles.
This is Vanguard’s version of the Schwab U.S. Small-Cap ETF (SCHA). However, VIOO has about one-third the number of stocks that SCHA holds.
Companies in VIOO tend to be smaller too. The weighted average market capitalization of a VIOO company is $2.5 billion compared to $4.9 billion for SCHA.
The primary differences between VIOO and SCHA are their number of holdings and fees.
Granted, it’s not entirely fair to compare VIOO and SCHA fees, considering they track different indices.
But we don’t think there’s a good reason to own both of these ETFs, so we’re going to compare their fees.
SCHA charges 0.04% annually, while VIOO charges 0.10%. While these are both low-cost options, the SCHA fund is more affordable.
It is up to you to decide if the difference in holdings is more important than fees.
VIOO Top Holdings:
- Omnicell (OMCL) 0.73%
- Innovative Industrial Properties (IIPR) 0.58%
- Exponent (EXPO) 0.56%
- Chart Industries (GTLS) 0.53%
- UFP Industries (UFPI) 0.53%
#6. Avantis International Small Cap Value ETF (AVDV)
- 1-Year Performance: +3.46%
- Expense Ratio: 0.36%
- Annual Dividend Yield: 1.91%
- AUM: $1.43 billion
- 3 Month Avg. Volume: 179,216
- Number of Holdings: 1320
- Inception Date: 2019
The Avantis International Small Cap Value ETF invests in non-U.S. developed small-cap companies trading at low valuations and with higher profitability ratios.
This is the first and only international ETF on our list. All the other funds exclusively invest in the U.S. equity market.
While AVDV loosely follows a benchmark, its portfolio management team can add value where they see fit based on current prices.
This is why AVDV can deviate from its benchmark at times.
The top five countries by percentage are Japan (24%), United Kingdom (16%), Canada (9%), Australia (9%), and Sweden (7%).
The top three sectors in AVDV are Industrials (23%), Materials (18%), and Financials (18%).
AVDV Top Holdings:
- AerCap Holdings (AER) 0.72%
- Marks and Spencer (MKS) 0.69%
- Howden Joinery Group (HWDN) 0.68%
- Rheinmetall (RHM) 0.66%
- M&G (MNG) 0.65%
Alternatives to the Best Small-Cap ETFs
Here are some alternatives to the six ETFs from above:
- Vanguard Small Cap ETF (VB)
- SPDR Portfolio S&P 400 Mid Cap (SPMD)
- Dimensional U.S. Small Cap ETF (DFAS)
- WisdomTree Emerging Markets SmallCap Dividend Fund (DGS)
- Vanguard S&P Mid-Cap 400 ETF (IVOO)
- Invesco S&P SmallCap Value with Momentum ETF (XSVM)
- iShares MSCI Brazil Small-Cap ETF (EWZS)
The mid-cap options are the next tier up from a market cap perspective.
Then there are the specific types of small-cap funds, such as regional-specific ones, others that pay a higher dividend or even emerging market ETFs.
There are hundreds of small-cap ETFs, and they each have their tradeoffs, but we’re confident that you can find the one that best suits your investing objectives.
Best Small-Cap ETFs: FAQs
Which small-cap ETF should I buy?
The Vanguard S&P Small Cap 600 ETF (VIOO) is a broad-based ETF that invests in a mix of growth and value stocks in the U.S. equity market. It is a low-cost way to gain exposure to a wide variety of small-cap stocks. Another good option is the Vanguard Small Cap ETF (VB).
Are small-cap ETFs worth it?
Small-cap ETFs are worth it if you’re seeking low-cost diversification to a specific segment of the equity market. Funds like SCHA, VB, and VIOO have expense ratios less than or equal to 0.10%.
What is the largest small-cap ETF?
The Vanguard Small Cap Value ETF (VBR) is the largest small-cap ETF by assets under management. It launched in 2004 and has accrued over $26 billion in total assets.
What is a good small-cap index fund?
The best small-cap index funds are the Vanguard Small Cap Index Fund (VB), the Schwab U.S. Small-Cap ETF (SCHA), and the iShares Russell 2000 Growth ETF (IWO). These funds are issued by well-trusted firms that prioritize low costs, diversification, and transparency.
Bottom Line: Best Small-Cap ETFs
Hopefully, you’re now more familiar with the small-cap ETF landscape.
This article is for informational purposes only, and it is not intended to be investment advice. Read our editorial guidelines and public equities research methodology to learn more about how we selected the best small-cap ETFs.