This Is One of the Best Small-Cap ETFs Available

Key Morningstar Metrics for iShares Core S&P Small-Cap ETF

• Morningstar Medalist Rating: Silver
• Process Pillar: Above Average
• People Pillar: Above Average
• Parent Pillar: Above Average

IShares Core S&P Small-Cap ETF’s IJR low fee, broad diversification, and profitability bias makes it hard to beat.

These funds track the S&P SmallCap 600 Index, which collects the smallest 600 stocks in the S&P 1500 Composite Index. Each constituent must meet initial market cap, liquidity, and profitability criteria to be eligible. The final portfolio is weighted by each stock’s float-adjusted market capitalization.

Market-cap weighting is an efficient way to allocate the portfolio because it harnesses the market’s consensus opinion of each stock’s relative value. Faster-growing companies take up a larger share of the portfolio, while smaller companies that may be struggling take on a less important role. This helps rein in turnover and associated trading costs.

The S&P SmallCap 600 Index operates on the smaller end of the small-cap market. Its average market cap was $3.3 billion as of September 2025, which is smaller than most index competitors. Small-cap stocks tend to be more volatile than their larger peers. However, the fund’s parent index, the S&P 1500 Composite, includes only profitable names. This removes the lowest-quality small-cap stocks and contains volatility. Stocks like these may also be less vulnerable to the increasing effects of private markets on public stocks.

While the smaller names that constitute this portfolio can be volatile, the strategy’s broad reach ensures that one stock’s misfortune should not derail the entire portfolio. It stashes just 7% of assets in its top 10 holdings. That breadth helped the exchange-traded fund return 10% annualized in the 10 years through September 2025, about 1.1 percentage points better than the small-blend Morningstar Category average.

iShares Core S&P Small-Cap ETF: Performance Highlights

During market rallies, smaller stocks can rise quickly, boosting the fortunes of funds targeting the smallest end of the market. This ETF has been a beneficiary, capturing more than 100% of the average US small-blend fund’s upside. Small but high-flying stocks proved especially helpful to the strategy in recent years. However, since this ETF sells holdings that graduate from a small-cap territory, it may not receive the stock’s full benefit.

Small-cap funds tend to be quite volatile, and this ETF is no exception. Its focus on the smallest names in the small-cap market can make for an especially bumpy ride. But its profitability screen brings volatility back to reasonable levels, supporting strong risk-adjusted returns. The index was only 6% more volatile than its average US category peer over the 10 years through September 2025, helping it post better risk-adjusted returns.

The ETF’s low fee presents a low hurdle for outperformance, and sound diversification spreads risk. Its profitability bias should also control risk in what can be an especially volatile arena. These compelling features position it for long-term outperformance.