The IJT and SLYG ETFs Nearly Match on Small Cap Growth Exposure

The main differences between State Street SPDR S&P 600 Small Cap Growth ETF (NYSEMKT:SLYG) and iShares SP Small-Cap 600 Growth ETF (NASDAQ:IJT) are fund size, trading liquidity, and small gaps in cost and yield, while their portfolios are almost indistinguishable.

Both the State Street SPDR S&P 600 Small Cap Growth ETF and the iShares SP Small-Cap 600 Growth ETF aim to provide exposure to U.S. small-cap stocks with strong growth characteristics, making them direct competitors for investors seeking growth in the small-cap segment. This comparison highlights their similar sector weights and holdings, while surfacing subtle but practical distinctions in fees, yield, and assets under management (AUM).

The 1-yr return represents total return over the trailing 12 months.

SLYG is slightly more affordable, with a 0.15% expense ratio compared to IJT’s 0.18%. SLYG also delivers a modestly higher dividend yield, which may appeal to investors looking to enhance portfolio income.

IJT holds 357 stocks and has been available for 25.4 years, tracking small-cap growth names across the U.S. Its largest sector exposures are industrials, technology, and healthcare, each around 16%-20%. The top positions—Spx Technologies (NYSE:SPXC), Dycom Industries (NYSE:DY), and Interdigital (NASDAQ:IDCC)—each make up just over 1% of assets, reflecting a well-diversified basket with no meaningful single-stock concentration.

SLYG mirrors IJT’s sector profile and top holdings, with 350 positions and similar weights in industrials, technology, and healthcare. Both funds show no unusual features or embedded quirks, so investors can expect straightforward exposure to the S&P SmallCap 600 Growth Index’s methodology and composition.

For more guidance on ETF investing, check out the full guide at this link.

It’s true that small-cap ETFs offer exposure to overlooked stocks that large investors often miss. Unfortunately, strategies that involve using them to invest in under-the-radar stocks have a fatal flaw. The best companies in the portfolio exit the small-cap index before they get a chance to produce big returns for investors.

Adding dividend payments slightly increases the returns investors can realize over the long term with these small-cap ETFs. That said, the returns have been more than a little disappointing compared to the benchmark S&P 500 index, which produced a 98.33% total return over the past five years.

Folks who bought the iShares SP Small-Cap 600 Growth ETF five years ago have realized a 33.43% return if we include the dividend payments they’ve received. The State Street SPDR S&P 600 Small Cap Growth ETF produced a slightly more attractive 33.97% return over the same time frame. If you’re going to go with one of these ETFs, State Street’s seems like the better option.

ETF: Exchange-Traded Fund; a pooled investment fund traded on stock exchanges, holding assets like stocks or bonds.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges to cover operating costs.
Dividend yield: The annual dividends paid by a fund or stock, expressed as a percentage of its price.
Beta: A measure of a fund’s volatility compared to the overall market, typically the S&P 500.
AUM: Assets under management; the total market value of assets managed by a fund.
Max drawdown: The largest percentage drop from a fund’s peak value to its lowest point over a period.
Sector exposure: The proportion of a fund’s assets invested in specific industry sectors.
Small-cap: Refers to companies with a relatively small total market value, typically between $300 million and $2 billion.
Growth characteristics: Traits of companies expected to grow earnings or revenue faster than the market average.
Index methodology: The rules and criteria used to select and weight securities in an index.
Trading liquidity: How easily a fund or security can be bought or sold without affecting its price.
Total return: The investment’s price change plus all dividends and distributions, assuming those payouts are reinvested.

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Cory Renauer 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.

The IJT and SLYG ETFs Nearly Match on Small Cap Growth Exposure was originally published by The Motley Fool