Small Caps: A Choice of ETFs

by

Right. So, another day, another investment decision. Honestly, it’s exhausting. It’s like choosing between two almost identical shades of beige. But beige is…safe, isn’t it? And that’s what we’re aiming for. Safe. Relatively. I’ve been looking at these small-cap ETFs, the Vanguard Small-Cap ETF (VB) and the Schwab U.S. Small-Cap ETF (SCHA). Both promise access to those exciting, potentially lucrative, but also terrifyingly volatile small companies. It’s a bit like dating, really. Lots of potential, lots of risk of being ghosted.

I’ve made a little list, just to clarify things. Because clarity is vital. Especially when money is involved. And especially when I’m involved. It goes like this:

  • Goal: To diversify into small-cap stocks without spending all day actively managing things. (I have a life, sort of.)
  • Problem: VB and SCHA are remarkably similar.
  • Current Mood: Mildly overwhelmed.

Let’s start with the basics. VB and SCHA are both “passive” ETFs, which means they just track an index. No fancy stock-picking, no charismatic fund manager trying to beat the market. Just…following the herd. Which, honestly, feels rather sensible. The numbers, as of February 9, 2026 (because dates are important, even if everything changes tomorrow), look like this:

Metric VB SCHA
Issuer Vanguard Schwab
Expense ratio 0.03% 0.04%
1-yr return 12.49% 16.27%
Dividend yield 1.27% 1.19%
AUM $169 billion $20 billion
Beta (5Y monthly) 1.23 1.29

VB is slightly cheaper, and throws off a slightly higher dividend. It’s the difference between buying supermarket own-brand coffee and the fancy Italian stuff. It feels good to save a few pennies, but does it really make a difference? Probably not. Though, I’m a historian, and I can tell you that small savings do add up over time. It’s the principle of the thing.

Looking at performance, SCHA has had a better year recently. But VB has done better over five years. It’s like choosing between a short-term fling and a long-term relationship. Both have their appeal. And both can end in tears. The “max drawdown” – the biggest loss you could have experienced – was a bit deeper for SCHA. Which is a fancy way of saying it’s a bit more volatile. Which, let’s be honest, is terrifying. I’ve seen enough market crashes to last a lifetime. (Number of grey hairs gained during 2020: uncountable.)

What’s inside these things, though? SCHA tracks the Dow Jones U.S. Small-Cap Total Stock Market Index, holding 1,730 stocks. Top sectors are tech, financials, and industrials. VB tracks the CRSP US Small Cap Index, with 1,324 stocks, weighted towards industrials, tech, and financials. Both funds are refreshingly straightforward. No leverage, no currency hedging, no complicated derivatives. Just…stocks. Which, after years of reading financial news, feels like a miracle.

The biggest difference, really, is size. VB is huge. $169 billion huge. Which means it’s very liquid. You can buy and sell shares without moving the price. SCHA is much smaller, at $20 billion. Which means…well, it’s a bit more vulnerable. It’s like the difference between a supertanker and a speedboat. Both can get you where you need to go, but one is a lot more stable.

So, which one to choose? Honestly, it’s a toss-up. If you want slightly lower fees and a massive asset base, go with VB. If you want a bit more tech exposure and don’t mind a bit more volatility, go with SCHA. Either way, you’re getting diversified exposure to the small-cap market. And that, in this chaotic world, feels like a sensible thing to do. (Number of times I’ve questioned all my life choices today: 7, and counting.)

Read More

2026-02-10 04:42