Better Buy: How Small-Cap ETFs ISCG and IJT Compare on Fees, Risk, and Income

The iShares S&P Small-Cap 600 Growth ETF (IJT 2.03%) and the iShares Morningstar Small-Cap Growth ETF (ISCG 1.51%) both target growth-oriented small-cap U.S. stocks, but they differ in cost, diversification, and trading characteristics.

This comparison examines how ISCG and IJT stack up on critical factors like expenses, performance, risk, and portfolio makeup.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.

ISCG is considerably more affordable on fees with a much lower expense ratio, potentially making a noticeable difference for cost-conscious investors. However, IJT boasts a higher yield, offering an advantage for those seeking passive dividend income.

Performance & risk comparison

What’s inside

ISCG splits its exposure across 971 small-cap growth stocks, with sector weights of 23% industrials, 20% technology, and 17% healthcare. Top positions include Lumentum, Kratos Defense & Security Solutions, and ATI, each accounting for less than 1% of assets. The fund’s 21-year track record and broad diversification may appeal to investors seeking a wide net within the small-cap growth universe.

IJT, by contrast, holds 348 stocks. Its top sector is technology, making up around 20% of assets. Top holdings include Arrowhead Pharmaceuticals, Armstrong World Industries, and InterDigital, all with similarly small individual weights. Both funds avoid leverage, currency hedges, or other structural quirks.

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

What this means for investors

Small-cap ETFs can help diversify your portfolio while also tapping into the growth potential of smaller companies.

Between the two funds, ISCG is the higher-risk, higher-reward investment. It’s outperformed IJT fairly substantially over the last year, but it’s also experienced a deeper max drawdown with a higher beta, signalling more severe volatility.

The two ETFs also differ in their fee structures and income potential. ISCG offers a much lower expense ratio of 0.06% compared to IJT’s 0.18%. In other words, investors will pay $6 per year in fees for every $10,000 invested in ISCG, compared to $18 per year for IJT. It’s a minor different on the surface, but it could amount to hundreds or even thousands of dollars over time.

IJT shines with its higher dividend yield, however, which can be a plus for income-focused investors. Between its higher yield and a generally lower risk profile, IJT could be better suited for long-term investors looking for a more stable investment, while ISCG offers an edge for those seeking greater growth potential.

Glossary

ETF: Exchange-traded fund that holds a basket of securities and trades on an exchange like a stock.
Expense ratio: Annual fund operating costs expressed as a percentage of the fund’s average assets.
Dividend yield: Annual dividends paid by a fund divided by its current share price, shown as a percentage.
Beta: Measure of a fund’s volatility compared with the overall market, typically the S&P 500 index.
AUM: Assets under management; the total market value of all assets held by the fund.
Max drawdown: The largest peak-to-trough decline in a fund’s value over a specified period.
Growth of $1,000: Illustration showing how a $1,000 investment would have changed in value over time.
Total return: Investment performance including price changes plus all dividends and distributions, assuming they are reinvested.
Small-cap: Companies with relatively small stock market values, typically a few hundred million to a few billion dollars.
Growth stocks: Companies expected to grow earnings or revenues faster than the overall market, often reinvesting profits instead of paying dividends.
Sector weights: The percentage of a fund’s assets invested in each industry sector, such as technology or industrials.
Leverage: Use of borrowed money or derivatives to amplify a fund’s exposure and potential returns or losses.