IJT offers higher yields while VBK is more affordable

of the Vanguard Small Cap Growth ETF ((NYSEMKT:VBK) and iShares S&P Small-Cap 600 Growth ETF ((NASDAQ: IJT) both target U.S. small-cap growth stocks, but VBK charges less fees and goes more toward industrials and technology, while IJT pays higher yields and has experienced less severe declines.

Both VBK and IJT are designed for investors looking to gain exposure to small US companies with growth characteristics. While their mission may seem similar, key differences in cost, sector exposure, and risk metrics may appeal to different types of investors. This comparison highlights the differences to clarify which funds may be best suited for specific portfolio objectives.

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

VBK is very affordable with its low cost ratio, while IJT costs three times more. However, IJT may appeal to income-oriented investors by offering a higher dividend payout than VBK.

IJT offers exposure to 356 U.S. small-cap growth stocks, with a balance of industries (21%), technology (18%), healthcare (15%), and financials (14%), according to a recent sector analysis. Its greatest properties, viz Interdigital Inc (NASDAQ: IDCC ) and Caretrust Reit Inc (NYSE:CTRE) Each account for only 1% of assets. The fund has a long track record of more than 25 years since inception.

In contrast, VBK has 551 securities and a heavy reliance on industrials (23%) with significant allocations to industrials (21%) and healthcare (17%). Her senior positions include Rocket Lab (NASDAQ: RKLB ), Comfort Systems USA (NYSE:FIX)and SanDisk (NASDAQ: SNDK )each making up more than 1% of the portfolio. Neither fund has significant rates or pursues an ESG, currency-hedged, or leveraged strategy.

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Both funds offer low-cost exposure to small-cap stocks. Small caps have had more time for a strong bull run, which has significantly underperformed the market in recent years. The Russell 2000 soared to new highs earlier in the year — a signal that investors can shift from large-cap stocks to small-caps promising higher upside.

Of course, Vanguard is known for its very low cost funds, which gives VBK an advantage here. However, some of these cost benefits are eaten up by IJT’s high yield.

There are slight differences in their sector weight and diversity. But a key difference that may tip the scales in IJT’s favor is its low latency. It has held up very well from VBK during the 2022 bear market. This allowed IJT to improve VBK in this time frame.

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John Ballard has no position in any of the stocks mentioned. The Motley Fool owns and recommends positions in Comfort Systems USA, Rocket Lab, and Vanguard Index Funds – Vanguard Small-Cap Growth ETF. Motley Fool has a disclosure policy.

IJT offers higher yield while VBK is more affordable Originally published by Motley Fool