Value ETFs: A Mid-Cap vs. Small-Cap Meander

by

Now, the world of Exchange Traded Funds – ETFs – is a remarkably efficient invention, isn’t it? A way to buy a little slice of everything, or, as in this case, a carefully curated selection of companies that someone, somewhere, has decided are ‘undervalued’. It’s a bit like finding a perfectly good antique shop, but instead of chipped teacups, you’re acquiring shares. We’re looking today at two such funds: the State Street SPDR S&P 600 Small Cap Value ETF (SLYV) and the iShares SP Mid-Cap 400 Value ETF (IJJ). Both aim to deliver a bit of a bargain, but they go about it with subtly different approaches. Think of it as choosing between a cozy, independent bookstore and a slightly larger, but still charming, branch of a national chain.

The core difference, and it’s a significant one, is size. SLYV leans towards the smaller end of the spectrum – the ‘small-cap’ companies – while IJJ focuses on those companies that are, well, mid-sized. It’s a bit like comparing a nimble sailboat to a moderately sized yacht. Both get you there, but they handle the waves a little differently. And, unsurprisingly, this difference in scale translates into differences in returns, risk, and the sort of businesses you end up owning.

Snapshot (Cost & Size)

Metric SLYV IJJ
Issuer SPDR iShares
Expense ratio 0.15% 0.18%
1-yr return (as of 2026-02-04) 13.3% 9.8%
Dividend yield 1.9% 1.7%
AUM $4.5 billion $8.5 billion

Now, let’s talk numbers. SLYV, being the slightly more economical option, boasts a lower expense ratio and a marginally better dividend yield. For the cost-conscious investor, or those who simply like getting a bit more for their money, that’s a definite plus. It’s the difference between ordering the house wine and springing for something a little more…ambitious.

Performance & Risk Comparison

Metric SLYV IJJ
Max drawdown (5 y) -28.68% -22.68%
Growth of $1,000 over 5 years $1,357 $1,528

However, performance isn’t always a simple equation. Over the past five years, IJJ has actually delivered a slightly higher return, turning a $1,000 investment into $1,528, compared to SLYV’s $1,357. But, and this is a crucial ‘but’, SLYV has been the more volatile of the two. Its ‘max drawdown’ – the biggest drop from peak to trough – has been considerably larger. This suggests that while SLYV has the potential for higher gains, it also comes with a greater risk of losing money. It’s a bit like driving a sports car – exhilarating, but potentially a bit hair-raising.

What’s Inside

IJJ, tracking a mid-cap value index, holds around 305 stocks, a portfolio that’s been maturing for over 25 years. Its sector allocation leans heavily towards financial services (25%), followed by industrials (17%) and consumer cyclicals (14%). Top holdings include U.S. Foods Holding, Reliance Steel & Aluminum, and Alcoa – solid, if not particularly glamorous, businesses. It’s a well-diversified portfolio, a bit like a balanced diet.

SLYV, in contrast, draws from the small-cap value universe, spreading its exposure across 460 holdings. Its sector mix is more evenly distributed, with financial services, consumer cyclicals, and industrials all vying for dominance. Top positions include Eastman Chemical, LKQ Corp., and Jackson Financial – companies that, while perhaps less recognizable, represent the engine of the American economy. And, notably, no single holding accounts for a particularly large proportion of the fund, further diversifying the risk.

For more in-depth guidance on ETF investing, there’s a rather useful guide available at [link].

What This Means for Investors

Both SLYV and IJJ offer exposure to undervalued stocks and the potential for strong returns. They’re both perfectly reasonable additions to a well-rounded investment portfolio. The choice between the two really comes down to your risk tolerance. SLYV, with its focus on smaller companies, offers greater growth potential, but also comes with a higher degree of volatility. IJJ, on the other hand, provides a more stable, albeit slightly less spectacular, ride. It’s a bit like choosing between a thrilling roller coaster and a leisurely canal boat. Both are enjoyable, but they offer very different experiences.

Ultimately, the best ETF for you will depend on your individual circumstances and investment goals. But hopefully, this little exploration has shed some light on the nuances of these two funds and helped you make a more informed decision. And remember, investing is a marathon, not a sprint. So, pace yourself, diversify your portfolio, and try not to panic when the market inevitably takes a dip.

Read More

2026-02-08 23:03