The iShares Core S&P Small-Cap ETF (IJR) and iShares Morningstar Small-Cap ETF (ISCB) are two prominent options for investors seeking small-cap exposure, each with distinct characteristics that influence their risk and return profiles. IJR, with a lower expense ratio of 0.06%, focuses on 640 holdings and applies a quality filter requiring positive earnings, which contributes to its lower volatility. In contrast, ISCB offers broader diversification with 1,548 holdings and a slightly lower expense ratio of 0.04%, appealing to cost-conscious investors.
The performance metrics reveal that while IJR has a more resilient profile during downturns due to its quality filter, ISCB’s extensive holdings can mitigate sector-specific risks. However, ISCB’s inclusion of unprofitable companies introduces higher volatility, as indicated by its greater beta and max drawdown.
For investors, the choice between IJR and ISCB hinges on their risk tolerance and investment strategy—whether they prioritize quality and liquidity or seek broader diversification at a lower cost.
Source: fool.com