IJT Offers Higher Yield While VBK Is More Affordable

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 a lower fee and tilts more toward industrials and tech, while IJT pays a higher yield and has experienced less severe drawdowns.

Both VBK and IJT are designed for investors seeking exposure to small-cap U.S. companies with growth characteristics. While their mandates appear similar, key differences in cost, sector exposures, and risk metrics may appeal to different types of investors. This comparison highlights those distinctions to help clarify which fund could be a better fit for specific portfolio goals.

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.

VBK is more affordable with its lower expense ratio, while IJT charges over three times as much. IJT, however, may appeal to income-focused investors by offering a higher dividend payout relative to VBK.

IJT offers exposure to 356 U.S. small-cap growth stocks, balancing industrials (21%), technology (18%), healthcare (15%), and financials (14%) as of its latest sector breakdown. Its largest holdings, such as Interdigital Inc (NASDAQ:IDCC) and Caretrust Reit Inc (NYSE:CTRE) each account for just over 1% of assets. The fund has a long track record, with more than 25 years since inception.

In contrast, VBK holds 551 securities and leans more heavily into industrials (23%), with significant allocations to technology (21%) and healthcare (17%). Its top positions include Rocket Lab (NASDAQ:RKLB), Comfort Systems USA (NYSE:FIX), and Sandisk (NASDAQ:SNDK), each making up over 1% of the portfolio. Neither fund carries notable quirks or follows an ESG, currency-hedged, or leveraged strategy.

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Both funds offer low-cost exposure to small-cap stocks. Small caps are overdue for a strong bull run, which have significantly underperformed the market in recent years. The Russell 2000 surged to new highs at the start of the year — a signal that investors could be rotating away from large-cap stocks to the promise of higher upside in small caps.

Of course, Vanguard is known for its ultra-low-cost funds, which gives VBK an advantage here. However, some of that cost advantage is eaten up by IJT’s higher yield.

There are minor differences in their sector weightings and diversification. But one key difference that may tilt the scales in favor of IJT is its lower drawdown. It held up much better than VBK during the 2022 bear market. That allowed IJT to outperform VBK over that time frame.

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

IJT Offers Higher Yield While VBK Is More Affordable was originally published by The Motley Fool