Small-cap value stocks are often attractive to investors seeking exposure to undervalued small-cap equities. While large-cap growth stocks frequently dominate the headlines, small-cap value stocks may offer unique diversification benefits. In this volatile but potentially rewarding market segment, both the iShares Morningstar Small-Cap Value ETF (ISCV) from iShares and the Vanguard Small-Cap Value ETF (VBR) from Vanguard provide low-cost investment avenues, yet they differ in terms of scale, recent performance, and industry weightings.
In terms of expense ratios, management fees are a critical factor in the long-term returns of an ETF. Both funds are highly efficient, with VBR having a slightly lower expense ratio of 0.05%, compared to ISCV’s 0.06%. As of June 8, 2026, ISCV had a total return of 27.10% over the past year, while VBR returned 24.80%. Regarding dividend yield, ISCV’s trailing 12-month distribution yield is 1.90%, versus VBR’s 1.70%. Beta, which measures price volatility relative to the S&P 500 Index (calculated based on five years of monthly returns), is 0.99 for ISCV and 0.96 for VBR. In terms of assets under management, ISCV holds $656.6 million, while VBR boasts $64.9 billion.
Regarding maximum drawdown over the past five years, ISCV recorded -25.30%, compared to VBR’s -24.20%. Based on an initial investment of $1,000, the total return over five years would have grown ISCV to $1,363 and VBR to $1,454.
VBR was launched in 2004 and employs a passive strategy tracking a diversified portfolio of small-cap value stocks, holding a total of 841 stocks. Its top three holdings are Jabil Inc. (JBL) at 0.77%, Flex Ltd. (FLEX) at 0.76%, and NRG Energy Inc. (NRG) at 0.75%. In terms of sector allocation, financial services account for 18%, industrials 18%, and consumer cyclical 13%. The trailing 12-month dividend per share is $4.14.
ISCV was also launched in 2004 and tracks an index of U.S. small-cap companies, holding a larger number of stocks at 1,069. Its top three holdings are TD Synnex Corp. (SNX) at 0.68%, Akamai Technologies Inc. (AKAM) at 0.64%, and Alcoa Corp. (AA) at 0.62%. In terms of sector weights, financial services account for 21%, consumer cyclical 14%, and industrials 12%. The trailing 12-month dividend per share is $1.41. Neither fund involves complex or special investment structures.
Investing in value stocks is a strategy famously employed by Warren Buffett. Due to the sheer number of small-cap stocks, applying this approach to the small-cap arena is quite challenging. Funds like VBR and ISCV offer an efficient way to capture the upside potential of value stocks in this segment.
ISCV and VBR are both low-cost small-cap value ETFs, but they are positioned differently. ISCV stands out for its greater diversification and recent returns, making it suitable for investors who prioritize portfolio diversity; VBR, with its massive scale, lower expense ratio, and superior long-term risk-adjusted performance, is better suited for investors who value liquidity and long-term holding. The specific choice depends on an individual’s emphasis on diversification, trading costs, and investment horizon.
