Key Points
The Schwab U.S. Small-Cap ETF (SCHA) holds nearly three times as many positions as the State Street SPDR Portfolio S&P 600 Small Cap ETF (SPSM).
Both ETFs carry identical 0.03% expense ratios, but SPSM has a higher dividend yield than SCHA.
SCHA has delivered a higher return over the past one- and five-year periods, while SPSM experienced a lower five-year maximum drawdown.
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Small-cap investing doesn't have to mean picking individual stocks -- and these two funds, the Schwab U.S. Small-Cap ETF (NYSEMKT:SCHA) and the State Street SPDR Portfolio S&P 600 Small Cap ETF (NYSEMKT:SPSM), offer investors an easy way to get broad exposure to the segment. Both are dirt cheap and built for buy-and-hold investors, but they take noticeably different approaches.
For starters, they track different benchmarks. SPSM follows the S&P SmallCap 600, which requires companies to be profitable before they're added to the index. SCHA tracks the Dow Jones U.S. Small-Cap Total Stock Market Index, a much broader universe that doesn't screen for profitability -- which explains why its portfolio is so much larger.
Snapshot (cost & size)
| Metric | SPSM | SCHA |
|---|---|---|
| Issuer | State Street | Schwab |
| Expense ratio | 0.03% | 0.03% |
| 1-year return (as of July 6, 2026) | 31.56% | 35.95% |
| Dividend yield | 1.36% | 0.99% |
| Beta | 1.08 | 1.21 |
| AUM | $16.9 billion | $24.2 billion |
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.
Both ETFs are about as cheap as it gets, with each charging a 0.03% expense ratio. However, SPSM pays a higher dividend of 1.36% compared to SCHA’s 0.99%.
Performance & risk comparison
| Metric | SPSM | SCHA |
|---|---|---|
| Max drawdown (5 yr) | (27.95%) | (30.79%) |
| Growth of $1,000 over 5 years (total return) | $1,425 | $1,439 |
What's inside
Launched in 2009, SCHA is the more diversified of the two funds, holding 1,728 stocks. Its sector mix is led by technology at 23.2%, followed by industrials at 15.5%, and healthcare at 15.4%. Its largest positions include Sandisk (NASDAQ:SNDK) at 6.0%, Lumentum Holdings (NASDAQ:LITE) at 1.3%, and Revolution Medicines (NASDAQ:RVMD) at 0.8%.
SPSM is more concentrated (relatively speaking), with 607 holdings. Its top sectors are financial services at 17.1%, industrials at 15.6%, and technology at 15.5%. Its largest positions include Molina Healthcare (NYSE:MOH) at 0.7%, Formfactor (NASDAQ:FORM) at 0.7%, and Viasat (NASDAQ:VSAT) at 0.7%. SPSM was launched in 2013.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Choosing between SCHA and SPSM really comes down to what you’re looking for in your small-cap exposure. SCHA's broader net -- 1,700+ holdings versus SPSM's 607 -- means it captures more of the small-cap market's long tail, including higher-risk, story-driven companies that haven't yet proven they can turn a consistent profit. That extra breadth may have helped SCHA post the stronger one-year return, but it also comes with more exposure to unprofitable or early-stage businesses.
SPSM's index, by contrast, requires companies to show positive earnings before they're added. That screen tends to weed out the most speculative names, which helps explain both its smaller historical drawdown and its higher dividend yield. For investors who are closer to retirement or who simply lose sleep over volatility, that quality filter can be worth the tradeoff in upside potential.
Cost isn't a differentiator here -- both funds charge a rock-bottom 0.03% expense ratio. The real decision comes down to risk tolerance: SCHA suits investors who want the fullest possible small-cap market exposure and can stomach bumpier returns, while SPSM appeals to those who prefer a tilt toward more established, profitable companies. That said, small-caps as a category -- SPSM included -- are inherently more volatile than large-cap stocks, so investors shouldn't mistake SPSM's profitability screen for a guarantee of smooth sailing during a broader market decline.
For long-term investors, either fund can serve as a reasonable small-cap building block in a diversified portfolio. The bottom line is that "small-cap ETF" isn't a one-size-fits-all category -- index methodology matters, and it's worth checking whether a fund screens for profitability before assuming two similarly priced funds will behave the same way.
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Andy Gould has positions in Lumentum. The Motley Fool has positions in and recommends Lumentum. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
