Key Points
ISCB carries a slightly higher expense ratio and a lower dividend yield compared to SPSM.
ISCB has delivered a higher one-year return and broader diversification, but with a deeper five-year drawdown.
ISCB holds more companies and tilts toward industrials, while SPSM is more concentrated in financial services.
- 10 stocks we like better than iShares Trust - iShares Morningstar Small-Cap ETF ›
State Street SPDR Portfolio S&P 600 Small Cap ETF (NYSEMKT:SPSM) and iShares Morningstar Small-Cap ETF (NYSEMKT:ISCB) both target U.S. small-cap stocks, but ISCB offers broader diversification and has outpaced SPSM over the past year, albeit with slightly higher costs.
Both SPSM and ISCB aim to give investors exposure to U.S. small-cap equities, but they differ in how they construct their portfolios and in some important metrics. This comparison digs into cost, performance, risk, holdings, and trading considerations to help clarify which ETF may appeal more, depending on investor priorities.
Snapshot (cost & size)
| Metric | SPSM | ISCB |
|---|---|---|
| Issuer | SPDR | iShares |
| Expense ratio | 0.03% | 0.04% |
| 1-yr return (as of 2026-03-11) | 20.76% | 23.03% |
| Dividend yield | 1.6% | 1.4% |
| Beta | 1.2 | 1.09 |
| AUM | $13.8 billion | $246.5 million |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months.
ISCB comes with a marginally higher expense ratio than SPSM, making SPSM slightly more affordable. SPSM also has a modest edge in dividend yield, which may appeal to investors seeking a higher payout from their small-cap allocation.
Performance & risk comparison
| Metric | SPSM | ISCB |
|---|---|---|
| Max drawdown (5 y) | -27.95% | -29.93% |
| Growth of $1,000 over 5 years | $1,095 | $1,138 |
What's inside
ISCB tracks a broad set of U.S. small-cap stocks, holding 1,561 companies as of March 11, 2026. The fund tilts slightly toward industrials (20%), financial services (17%), and healthcare (14%). Its top holdings include Lumentum Holdings, CF Industries, ATI, and Albemarle, though none represent more than 1% of assets, highlighting the fund’s diversification.
In contrast, SPSM focuses on the S&P SmallCap 600 index, which results in a portfolio of 603 holdings. It is slightly heavier in financial services (18%), with comparable weightings in industrials. Top names like Solstice Adv Materials, Interdigital, and CareTrust REIT each comprise less than 1% of the fund. Neither fund employs leverage or carries notable quirks, but SPSM’s more concentrated approach may lead to different sector exposures over time.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Investing in small-cap stocks provides an opportunity to capitalize on greater upside potential as these businesses grow. It can also be a good way to diversify a portfolio that already holds traditional large-cap stocks that may offer stability but slower growth. And investing via an exchange-traded fund means you don’t have to worry about backing the right small-cap stock — instead, you can focus on which small-cap investing strategy fits your style best.
The matchup between ISCB and SPSM is a good example of this. SPSM is an index fund that seeks to track the S&P SmallCap 600 index. That means its holdings will always be limited to around 600 stocks that also comprise that index. To be included in the index, a stock must have a market cap between $1.2 billion and $8 billion and companies must have positive earnings over the most recent quarter as well as cumulatively over the most recent four quarters.
ISCB holds more than twice as many stocks, but its total assets under management is just a fraction of SPSM’s. It tracks the Morningstar US Small Cap Extended Index, which has slightly different criteria for inclusion. One big difference is that there is no profitability requirement for inclusion in the Morningstar index. The two ETFs have performed pretty similarly over the last one and five years, offer similar dividend yields, and charge similar expense ratios. Choosing between the two will likely come down to which index criteria you prefer.
Should you buy stock in iShares Trust - iShares Morningstar Small-Cap ETF right now?
Before you buy stock in iShares Trust - iShares Morningstar Small-Cap ETF, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and iShares Trust - iShares Morningstar Small-Cap ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $511,735!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,140,464!*
Now, it’s worth noting Stock Advisor’s total average return is 946% — a market-crushing outperformance compared to 191% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of March 13, 2026.
Sarah Sidlow has no position in any of the stocks mentioned. 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.
