ISCG vs. VBK: Which ETF Offers Lower Fees, More Liquidity, and Greater Returns?

Vanguard Small-Cap Growth ETF (VBK +0.61%) and** iShares Morningstar Small-Cap Growth ETF** (ISCG +0.57%) both offer diversified exposure to U.S. small-cap growth stocks, but differ in portfolio breadth, assets under management (AUM), and trading liquidity.

Both funds target the small-cap growth segment, with VBK tracking the CRSP U.S. Small Cap Growth Index and ISCG following a Morningstar methodology. This comparison looks at their respective costs, performance, risk, underlying holdings, and practical considerations for investors seeking to tap into smaller growth companies.

Snapshot (cost & size)

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.

ISCG charges a slightly higher expense ratio than VBK, but the difference is just 0.01 percentage points, while ISCG also offers a marginally higher dividend yield.

Performance & risk comparison

What’s inside

ISCG holds 963 stocks, making it one of the broader small-cap growth ETFs, and has been running for over 21 years. Its sector mix leans toward industrials (25%), technology (21%), and healthcare (16%). The top holdings are Lumentum Holdings Inc (LITE 0.70%), Ati Inc (ATI +0.25%), and Rbc Bearings Inc (RBC 0.74%), with no single stock accounting for more than 1.7% of assets. The fund does not employ leverage, currency hedges, or ESG screens.

In contrast, VBK holds 579 stocks, with a higher allocation to technology (26%) and similar weightings to industrials (23%) and healthcare (17%). Its top positions are Rocket Lab Corp (RKLB +6.38%), Comfort Systems USA Inc (FIX 0.33%), and Sandisk Corp (SNDK +0.07%), each around 1.2%-1.3% of assets. VBK also avoids leverage or other structural quirks, tracking the CRSP U.S. Small Cap Growth Index for a straightforward approach.

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What this means for investors

Exchange-traded funds (ETFs) are a great way for investors to gain exposure to U.S. small-cap stocks. Both the Vanguard Small-Cap Growth ETF (VBK) and** iShares Morningstar Small-Cap Growth ETF** (ISCG) offer compelling options for investors. Let’s delve into the pros and cons of each.

First, there’s VBK. In the head-to-head matchup with ISCG, VBK takes the gold on a few fronts. It has slightly lower fees (0.05% vs. 0.06%). It also has much higher AUM ($40.0 billion vs. $0.9 billion). This is important because AUM serves as an indicator of liquidity — that is, how easily an investor can buy or sell shares. Lastly, VBK has delivered a better return over the last five years.

As for ISCG, it has advantages, too. ISCG has delivered a better one-year return (24.7% vs. 23.0%). It also boasts a slightly higher dividend yield (0.6% vs. 0.5%). Finally, it has a higher concentration of industrial stocks than VBK, which may appeal to investors seeking an alternative to the tech-heavy tilt of many large or mega-cap ETFs.

In summary, VBK and ISCG are both appealing options for small-cap investors. VBK wins the matchup on fees, liquidity, and long-term performance. Meanwhile, ISCG takes the prize on long-term performance, dividend yield, and sector exposure.