IJJ vs. VBR: Should Value Investors Choose Mid-Cap Stability or Small-Cap Growth Potential?

The iShares SP Mid-Cap 400 Value ETF (NYSEMKT:IJJ) and Vanguard Small-Cap Value ETF (NYSEMKT:VBR) differ most in cost, size, and portfolio breadth -- with VBR offering much lower fees and nearly triple the holdings, while IJJ provides a mid-cap focus.

These two value-oriented exchange-traded funds aim to capture U.S. stocks trading below their estimated worth, but with different approaches: IJJ targets mid-cap companies with value characteristics, while VBR tracks a broader small-cap value index. Here’s how they stack up on cost, performance, risk, and what’s inside.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.

VBR stands out as the more affordable choice with a 0.07% expense ratio, compared to IJJ’s 0.18%.

Performance & risk comparison

What's inside

VBR holds a sweeping portfolio of 840 stocks, focusing on U.S. small-cap companies that meet value criteria. The fund’s largest sector exposures are industrials (19%), financial services (18%), and consumer cyclicals (13%). Its top holdings, including NRG Energy (NYSE:NRG), Sandisk (NASDAQ:SNDK), and EMCOR Group (NYSE:EME), each make up less than 1% of assets, signaling broad diversification. With 21.9 years in operation and $59.6 billion in assets under management (AUM), VBR’s scale and index-tracking approach may appeal to investors seeking wide market coverage at a low cost.

IJJ, by contrast, concentrates on mid-cap value stocks, with the heaviest weights in financial services (19%), industrials (15%), and consumer cyclicals (12%). IJJ’s 309 holdings create a more focused portfolio, potentially leading to different risk and return characteristics versus VBR’s broader, small-cap emphasis.

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What this means for investors

IJJ and VBR both target undervalued American companies, but IJJ focuses on mid-caps while VBR goes smaller, creating fundamentally different risk-return profiles for investors. The cost difference is substantial. VBR charges just 0.07% annually compared to IJJ's 0.18% expense ratio, meaning Vanguard's fund costs less than half as much to own. Additionally, VBR dominates in scale with approximately $59.6 billion in assets versus IJJ's $8 billion, reflecting its popularity among value investors.

However, IJJ brings the appeal of mid-cap stocks, which historically offer a middle ground between small-cap volatility and large-cap stability. Mid-cap companies have typically passed their riskiest early-stage growth phase but still retain meaningful expansion potential. Small-cap stocks in VBR, by contrast, can deliver stronger long-term returns but experience sharper price swings during market downturns.

Cost-conscious value investors prioritizing maximum long-term growth potential should favor VBR's ultra-low fees and small-cap exposure. Investors seeking a somewhat smoother ride with value characteristics might prefer IJJ's mid-cap approach, accepting slightly higher costs for potentially reduced volatility.

Glossary

Expense ratio: The annual fee, expressed as a percentage of assets, charged by a fund to cover operating costs.
Dividend yield: Annual dividends paid by a fund or stock, divided by its current price, shown as a percentage.
Beta: A measure of a fund's volatility compared to the overall market, typically the S&P 500.
Assets under management (AUM): The total market value of all assets managed by a fund or investment company.
Max drawdown: The largest percentage drop from a fund’s peak value to its lowest point over a specific period.
Growth of $1,000: How much a $1,000 investment would have increased or decreased over a set time frame.
Small-cap: Companies with relatively small total market values, typically between $300 million and $2 billion.
Mid-cap: Companies with medium-sized total market values, generally between $2 billion and $10 billion.
Value stocks: Shares of companies considered undervalued based on financial metrics like earnings or book value.
Sector exposure: The proportion of a fund’s assets invested in specific industry categories, such as financials or industrials.
Index-tracking: A strategy where a fund aims to replicate the performance of a specific market index.

Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends EMCOR Group. The Motley Fool recommends Flex. The Motley Fool has a disclosure policy.