Schwab and Vanguard Small Cap ETFs Outperforming More Liquid iShares

Includes: IJR, IWC, IWM, SCHA, VB
by: MyPlanIQ

U.S. small cap stocks have been doing well recently. In fact, the small cap blend category (NYSEARCA:IWM) has a 24.15% 52-week return. Only the Smallcap Growth (NYSEARCA:IWO) and Midcap Growth (NYSEARCA:IWP) have the higher 52-week returns. For more detailed performance, please refer to here.

Smallcap Blend (IWM) is now ranked as second in the following U.S. equity style trend score table.

Assets Class Symbols 03/04
Russell Smallcap Growth IWO 14.99% 17.86% v
Russell Smallcap Index IWM 12.96% 16.32% v
Russell Midcap Growth IWP 12.68% 15.65% v
Russell Smallcap Value IWN 11.71% 15.18% v
Russell Midcap Indedx IWR 11.39% 14.3% v
Russell Midcap Value IWS 10.81% 13.86% v
Russell Largecap Growth IWF 10.19% 12.42% v
Russell Largecap Index IWB 9.41% 11.89% v
Russell Largecap Value IWD 9.36% 11.94% v

The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).

To gain exposures in US Small Cap stocks, one can choose one of the five ETFs listed in the following table, among other ETFs in this category. These five ETFs have the highest average trading volumes in the Small cap stock ETFs category.

Let's review their performance:

Description(Symbol) 1Yr 3Yr 5Yr 1Yr Sharpe Volume(NYSE:K)
Vanguard Small Cap ETF (NYSEARCA:VB) 28.25% 8.18% 4.25% 127.83% 219
iShares S&P SmallCap 600 Index (NYSEARCA:IJR) 26.7% 7.1% 3.13% 122.73% 626
iShares Russell 2000 Index (IWM) 26.68% 7.21% 2.67% 117.63% 49,700
iShares Russell Microcap Index (NYSEARCA:IWC) 25.51% 3.91% -1.65% 100.14% 212
Schwab U.S. Small-Cap ETF (NYSEARCA:SCHA) 30.17% NA NA 133.31% 223

From the above table, it is very clear that Schwab ETF (SCHA) achieved highest 1 year return and highest Sharpe ratio (1.33). Since Schwab ETF was created in 11/2009, it has shortest history and thus its 3 year and 5 year performance can not be compared. But its extra 2% return in the last one year is impressive.

If we expand the time horizon, Vanguard Small Cap ETF (VB) stands out as a clear winner, in both last 3 and 5 years. Compared with iShares S&P SmallCap 600 (IJR), in the last 5 years, VB gave investors extra 1.12% annually. This is something not very insignificant. What is more, if one compares VB with the most popular iShares Russell 2000 Index ETF (IWM), VB returned extra 1.58% annually! This extra return can not be explained by the low expense ratio in VB alone, as VB has 0.12% expense, compared with IJR's 0.2%.

The takeaway is that investors should pay attention to the performance among ETFs, even in the same category. The 1-2% annual return difference is striking. A systematic and periodic review of these ETFs can definitely improve portfolio performance.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

About this article:

Problem with this article? Please tell us. Disagree with this article? .