Small Fortunes: A Study in Growth ETFs

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The pursuit of growth, dear reader, is a most human endeavor. And yet, to chase it blindly is to mistake motion for progress. We find ourselves contemplating two vessels, the Vanguard Small-Cap Growth ETF (VBK) and the iShares S&P Small-Cap 600 Growth ETF (IJT), each promising a share in the burgeoning fortunes of smaller companies. The question, naturally, is not merely which will grow, but at what cost to one’s sensibilities – and one’s portfolio.

Both funds, you see, are predicated on the charmingly optimistic notion that size does not always equate to success. They aim to capture the dynamism of those companies too modest to grace the halls of the large-cap aristocracy. A sensible ambition, perhaps, if one is willing to accept a degree of volatility that would make a lesser investor weep into their sherry.

A Matter of Expense & Scale

Metric IJT VBK
Issuer iShares Vanguard
Expense Ratio 0.18% 0.07%
1-yr Return (as of Jan. 17, 2026) 8.63% 12.47%
Dividend Yield 0.91% 0.54%
Beta (5Y monthly) 1.18 1.43
AUM $6 billion $39 billion

It is a truth universally acknowledged, that a fund in possession of a lower expense ratio must be more agreeable to the discerning investor. VBK, with its decidedly modest fee, possesses a distinct advantage. A larger pool of assets under management (AUM), while not a guarantee of brilliance, does suggest a degree of popularity – or at least, a widespread acceptance of risk. IJT, however, offers a slightly more generous dividend yield, a sop to those who believe income is the sole purpose of investment – a rather pedestrian view, if you ask me.

Performance & the Illusion of Control

Metric IJT VBK
Max Drawdown (5 y) -29.23% -38.39%
Growth of $1,000 over 5 years $1,227 $1,155

The market, dear reader, is a fickle mistress. While past performance is no guarantee of future results, it does provide a delightful source of conversation. IJT has demonstrated a slightly more restrained descent during periods of market distress, a virtue often overlooked in the pursuit of extravagant gains. VBK, with its bolder swings, offers the potential for greater reward – and, naturally, a more dramatic reckoning. To seek only stability is to deny oneself the exquisite thrill of risk.

The Composition of Dreams

VBK, holding 552 positions, is a veritable tapestry of ambition. Its allocation – 27% to technology, 21% to industrials, and 18% to healthcare – reveals a decided fondness for the future. Top holdings include Insmed, Comfort Systems USA, and SoFi Technologies, names that whisper of innovation and disruption. This is a portfolio that leans into the winds of change, with a diversification that prevents any single folly from capsizing the entire vessel.

IJT, with a more modest 348 stocks, presents a slightly more balanced – and perhaps, slightly more boring – composition. Its allocation – 20% to technology, 19% to industrials, and 17% to healthcare – suggests a desire to avoid undue concentration. Leading positions include Arrowhead Pharmaceuticals, Armstrong World Industries, and InterDigital, names that evoke a sense of solid, if unspectacular, progress.

The Investor’s Dilemma

Small-cap stocks, like undiscovered artists, possess the potential for exceptional growth. Both ETFs offer a share in this potential, but at what cost to one’s peace of mind? VBK, with its heavier tilt towards technology, is undeniably the more volatile option. It is a fund for those who relish a challenge – and who can afford to lose a few fortunes along the way.

IJT, with its lower beta and slightly higher dividend yield, offers a degree of comfort. It is a fund for those who prefer a steady, if unspectacular, return. But remember, dear reader, that to seek only safety is to condemn oneself to a life of quiet desperation.

The expense ratio, of course, is a matter of simple arithmetic. To pay nearly double for IJT, when VBK offers superior returns, is a folly that even the most ardent aesthete would struggle to justify. The true cost of investing, however, is not measured in dollars and cents, but in the willingness to embrace risk – and to accept the inevitable consequences.

A Glossary of Useful Absurdities

ETF: A rather pedestrian vehicle for delivering a basket of securities.
Expense Ratio: The annual cost of maintaining this vehicle – a sum that should be kept to a minimum.
Dividend Yield: A small consolation prize for those who prioritize income over growth.
Assets Under Management (AUM): A measure of popularity – or, at least, widespread acceptance of risk.
Small-Cap: Companies with modest ambitions – and, potentially, enormous rewards.
Growth Stocks: Companies that promise to grow – or, at least, to attempt to do so.
Max Drawdown: The largest decline in value – a reminder that even the most promising investments can fall.
Beta: A measure of volatility – a number that should be ignored by those who possess true courage.
Total Return: The sum of all gains and losses – a number that should be viewed with a healthy dose of skepticism.
Sector Allocation: The art of dividing one’s portfolio among different industries – a task best left to the professionals.
Diversification: Spreading one’s investments across many securities – a strategy that is both sensible and profoundly boring.
Index Tracking: The art of replicating the performance of a specific market index – a task that is both pointless and remarkably popular.

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2026-01-18 06:22