Schwab Small-Cap ETF Edges Past Vanguard in One-Year Returns, Fueled by Sandisk Stake

Key Points

• The Schwab U.S. Small-Cap ETF and the Vanguard Morningstar Small-Cap ETF both feature an identical, highly competitive expense ratio of 0.03%.

• Over the past year, the Schwab fund has delivered stronger total returns, though it experienced a more pronounced maximum drawdown during the previous five years.

• The Vanguard fund manages substantially more assets and currently offers a higher trailing dividend yield.

The Schwab U.S. Small-Cap ETF (NYSEMKT:SCHA) and the Vanguard Morningstar Small-Cap ETF (NYSEMKT:VB) both provide cost-effective access to small-cap equities, distinguishing themselves primarily through their choice of underlying index and resulting sector exposure.

For investors seeking small-cap exposure, these two established funds present compelling long-term growth opportunities. While each offers a low-cost gateway into the segment, they track different benchmarks, producing distinct risk characteristics, portfolio sizes, and sector tilts. This analysis examines how these variations in portfolio construction can influence overall market exposure and income generation.

Snapshot: Cost and Size

Metric | SCHA | VB
Issuer | Schwab | Vanguard
Share price (as of 8/27/26) | $34.77 | $304.28
Expense ratio | 0.03% | 0.03%
1-year return (as of 8/27/26) | 28.5% | 21.9%
Dividend yield | 1.0% | 1.2%
Beta | 1.10 | 1.04
AUM | $23 billion | $183.4 billion

Beta quantifies price volatility relative to the S&P 500, calculated from monthly returns over the fund’s available history (up to five years). The one-year return reflects total return over the trailing twelve months. Dividend yield represents the trailing twelve-month distribution yield.

Both funds are remarkably affordable, sharing identical 0.03% expense ratios. The Vanguard option currently delivers a modestly higher distribution yield of 1.2%, offering greater income potential than the Schwab fund’s 1.0% yield.

Performance and Risk Comparison

Metric | SCHA | VB
Max drawdown (5 yr) | (30.8%) | (28.2%)
Growth of $1,000 over 5 years (total return) | $1,432 | $1,442

What’s Inside

The Vanguard Morningstar Small-Cap ETF seeks to replicate the performance of small-capitalization companies through the CRSP US Small Cap Index. It maintains a diversified portfolio of approximately 1,300 holdings. Sector allocation is led by industrials at 21%, technology at 14%, and consumer discretionary at 13%. Top holdings include Revolution Medicines Inc at 0.47%, Natera Inc at 0.45%, and EMCOR Group Inc at 0.44%. The fund was introduced in 2004. Over the trailing twelve months, the Vanguard Morningstar Small-Cap ETF has distributed $3.61 per share, translating to a 1.2% yield on its recent price of approximately $304.28.

The Schwab U.S. Small-Cap ETF delivers exposure to the Dow Jones U.S. Small-Cap Total Stock Market Index. Comprising roughly 1,700 positions, this fund offers broader reach across the small-cap universe. Its portfolio shows greater concentration in technology at 23%, industrials at 17%, and financial services at 15%. Notable positions include Sandisk at 4.6%, Lumentum Holdings at 1.4%, and Revolution Medicines at 0.87%. Launched in 2009, the fund has distributed $0.36 per share over the trailing twelve months, equating to a 1.0% yield on its recent share price of approximately $34.77.

Which Looks Like the Better Buy

Incorporating small-cap stocks into a diversified portfolio is widely regarded as a sound strategy for capturing growth and broadening market exposure. These companies typically carry market capitalizations ranging from $250 million to $200 billion. While they often operate in earlier stages of development, which introduces additional risk, they also offer the potential to identify emerging market leaders at an early stage.

Small-cap index funds, holding more than 1,000 stocks in this comparison, help mitigate that inherent risk. SCHA and VB share many similarities: both maintain low expense ratios, comparable betas, and nearly equivalent five-year performance records. The most significant distinction between the two lies in their underlying indexes.

SCHA tracks the Dow Jones U.S. Small-Cap Total Stock Market Index, while VB follows the CRSP US Small Cap Index. These benchmarks employ slightly different weighting methodologies that influence portfolio composition. SCHA’s approach elevates Sandisk to its largest position, which likely contributes to its stronger one-year performance relative to VB. Additionally, SCHA’s top holdings represent a greater proportion of the total portfolio compared to VB’s. Investors drawn to this more concentrated methodology may find SCHA worth a closer examination. It is also worth noting that while SCHA holds a greater number of individual stocks, its total assets under management remain smaller than VB’s.

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