Better iShares ETF: IJJ's Mid-Cap Focus vs. ISCV's Small-Cap Stocks

The iShares S&P Mid-Cap 400 Value ETF (NYSEMKT:IJJ) differs from the iShares Morningstar Small-Cap Value ETF (NYSEMKT:ISCV) in its mid-cap focus, lower stock count, higher assets under management, and higher expense ratio, while ISCV provides broader small-cap exposure at a lower cost and with a slightly higher yield.

Both funds aim to capture value stocks, but IJJ concentrates on mid-sized U.S. companies, whereas ISCV casts a wider net among small-caps. This comparison breaks down their key differences in cost, performance, risk, and portfolio makeup to help investors decide which may better fit their strategy.

Snapshot (cost & size)

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

ISCV looks more affordable with a 0.06% expense ratio, compared to IJJ’s 0.18%. ISCV also offers a marginally higher dividend yield, making it the more cost-effective choice for income-oriented investors.

Performance & risk comparison

What's inside

IJJ homes in on mid-cap value, holding 305 stocks and leaning into Financial Services (25%), Industrials (17%), and Consumer Cyclical (14%). Top positions include US Foods Holding Corp. (NYSE:USFD), Reliance Steel & Aluminum (NYSE:RS), and Alcoa Corp. (NYSE:AA). The fund’s 25.5-year track record and $8.5 billion in assets under management suggest strong investor interest, with no notable quirks or specialty screens.

ISCV, by contrast, covers a much larger small-cap universe with 1,083 holdings. Its sector mix tilts toward Financial Services (21%), Consumer Cyclical (15%), and Industrials (13%). Leading positions are Viatris Inc. (NASDAQ:VTRS), Alcoa Corp., and Annaly Capital Management REIT Inc. (NYSE:NLY), providing broader diversification across small companies.

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What this means for investors

The iShares S&P Mid-Cap 400 Value ETF (IJJ) and the iShares Morningstar Small-Cap Value ETF (ISCV) offer investors exposure to companies of significantly different size. Choosing between them comes down to the individual’s investment goals.

ISCV’s small-cap focus is great for aggressive investors seeking high growth companies, as demonstrated by its higher return over the past year. It also sports a better dividend yield and substantially lower expense ratio.

However, investing in small caps comes with greater volatility and risk. This is seen in ISCV’s higher beta and max drawdown. Small cap companies also have limited analyst coverage, and are more vulnerable to business failure. Adding to this is ISCV’s smaller basket of stocks at 305, which can heighten volatility.

IJJ is for investors who want the higher growth potential of mid-cap stocks compared to large caps, but greater stability over small caps. IJJ also sports a much larger AUM than ISCV, providing greater liquidity.

IJJ’s downsides include its lower growth potential compared to small caps, which is seen in its smaller one-year return, and higher expense ratio. However, its more than one thousand holdings give it great diversification, helping to limit risk.

Ultimately, IJJ is for investors who want a balance between growth and stability, while ISCV is for those seeking high growth.

Robert Izquierdo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.