Best small-cap ETFs: Vanguard’s VB beats three great funds all charging just 0.03%

For a cheap fund of U.S. small companies, buy Vanguard Morningstar Small-Cap ETF, VB. It charges 0.03%. Buy a different fund if you want a different list of companies.

The returns below run through Friday, Oct. 30, 2026, with distributions reinvested.

A cheap U.S. small-cap fund

VB tracks the Morningstar US Small Cap Index. Vanguard's Sept. 30 fact sheet describes that index as the small-cap segment of the U.S. market. The fund held 1,301 stocks that day, the median company was worth $10.7 billion, and Vanguard reported $76.9 billion in the ETF.

A median company worth $10.7 billion is small as Morningstar draws the line. It is not the smallest end of the U.S. market. If you want smaller companies than that, the Russell 2000 is the list, and the fund to hold is VTWO.

SCHA charges the same 0.03% for a wider list. Schwab's June 2026 prospectus says the Dow Jones U.S. Small-Cap Total Stock Market Index is the companies ranked 751 through 2,500 by full market capitalization, weighted by the shares available to trade. Dow Jones, as of Dec. 31, 2025, also counts companies ranked 501 through 1,000 as mid-cap, so this fund holds the smaller end of that mid-cap range and continues down to the 2,500th company.

Over the past year SCHA returned 19.6% and VB returned 16.1%. The gap is 3.5 percentage points. The fees are the same, so the difference is the list of companies. Buy VB if you asked for small companies. Buy SCHA if you want everything after the 750 largest.

Companies that are making money

Buy SPSM if you want the S&P SmallCap 600. It charges 0.03%.

S&P Dow Jones Indices will not add a company to that index unless the sum of its most recent four quarters of earnings is positive, and the most recent quarter is positive as well. The Russell 2000 has no such test. S&P set both points out in an October 2024 comparison of small-cap indexes.

IJR tracks the same index and charges 0.06%. Over the past year it returned 20.8%, and SPSM returned 20.9%. On a $10,000 holding, the extra fee is $3 a year.

iShares reported $105.6 billion in IJR as of Oct. 30. Over the 20 trading days through that date, it averaged $478 million a day, against $91 million for SPSM. For an account you plan to hold, buy SPSM. Buy IJR if you need that much trading.

The Russell 2000

Buy VTWO if you want the Russell 2000 and you plan to hold it. Vanguard's Sept. 30 fact sheet describes the index as about 2,000 of the smallest U.S. stocks, roughly 8% of the U.S. market. The fund charges 0.06%. Vanguard reported $16.6 billion in it as of that date.

IWM tracks the same index and charges 0.19%. Over the past year it returned 15.2%, and VTWO returned 15.4%. The extra fee is $13 a year on $10,000.

Our grade is an A for VTWO and a B for IWM, among the same broad U.S. small-cap funds. They own the same index, and VTWO is the cheaper one.

Over the 20 trading days through Oct. 30, IWM averaged $6.7 billion a day, against $173 million for VTWO. Pay the higher fee if you trade options or move a large amount. For a holding, buy VTWO.

Cheap, profitable U.S. companies

Buy AVUV if you want a fund that chooses cheap, profitable U.S. small companies instead of owning a whole index. Avantis says it selects for low valuations and higher profitability. The fee is 0.25%, against 0.03% for VB. You are paying for that selection, not for a cheaper copy of the same list.

It returned 28.5% over the past year. That is what the approach returned. It is not, by itself, a reason to call the fund the best small-cap ETF.

The growth side of that small-cap market had a different year. Vanguard Morningstar Small-Cap Growth ETF, VBK, charges 0.05%. Vanguard says it tracks the growth companies in the Morningstar US Small Cap Index. It returned 10.3%. The two results are 18.2 percentage points apart. The fee gap between the funds is 0.20 percentage points.

Buy VBK only if you want those growth companies. Otherwise buy AVUV.

Over the past year, the kind of company in the fund mattered more than what the fund charged.

Small companies outside the United States

Buy VSS if you want one fund for small companies outside the U.S., including emerging markets. It tracks the FTSE Global Small Cap ex US Index and charges 0.06%. It returned 7.2% over the past year.

Buy Schwab International Small-Cap Equity ETF, SCHC, if you want developed markets only. It tracks the FTSE Developed Small Cap ex US Liquid Index, charges the same 0.06%, and returned 9.5%.

Avantis International Small Cap Value ETF, AVDV, applies that same approach to developed markets outside the U.S., Avantis says. It charges 0.36%. On a $10,000 holding, that is $30 a year more than VSS. It returned 21.2% over the past year.

Buy AVDV only if you want that selection and will pay for it. For a broad foreign small-cap fund, buy VSS.