---
title: "Best small-cap ETFs: Vanguard’s VB beats three great funds all charging just 0.03%"
url: "https://etf.net/news/vb-tops-small-cap-etf-picks-2026-11-02"
published_at: "2026-11-02T17:14:22.258Z"
updated_at: "2026-11-02T22:14:55.592Z"
byline: "ETF.net Research"
---

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

Schwab's fund is the wider cut at the same 0.03% fee, State Street's S&P 600 fund is for companies that are making money, and Vanguard's Russell 2000 fund is the one to hold if that index is the job.

By ETF.net Research. Published Nov 2, 2026.

Vanguard Morningstar Small-Cap ETF (VB), formerly Vanguard Small-Cap ETF, is our pick for a core U.S. small-cap fund.

VB is the ETF share class of a $175.8 billion index fund that held 1,301 stocks as of Sept. 30.

As we expect from Vanguard, its expenses are a razor-thin 0.03% a year, or $3 on $10,000. It's not the only small-cap ETF that holds its expenses to that miniscule level: There are at least three others — all worthy competitors — that we look at in the paragraphs below.

VB's index uses buffers that slow the tide of stocks moving in and out of it at each rebalance. Turnover was 16.8% last year.

NOTE: VB holds larger companies than most small-cap funds, so investors who specifically  want exposure to the smallest companies should consider at SCHA, SPSM or VTWO below.

## Performance

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

Table: What you want, Fund, Fee, This year, from Dec. 31, 2025, Past year through Oct. 30

## VB tracks the Morningstar US Small Cap Index. Here's how it works

The Moriningstar US Small Cap Index (formerly the CRSP US Small Cap Index, until July 2026)  lines up U.S. stocks from largest to smallest. The biggest companies are large and midcap companies, which together make up 85% of the market’s total values. VB skips those companies, and holds the next group, which accounts for the following 13% of the market’s value.

VB's portfolio leaves out the smallest companies, which make up the last 2%. This is due to liquidty problems: When a fund house as large as Vanguard muscles in to microcap stocks, they tend to push prices up as they buy them, against the interests of investors.

According to Morningstar, the Index’s rules are designed to keep trading costs down. A stock near a size cutoff has to move through a 'buffer zone' before the index reclassifies it: When a stock does move between size groups, the index shifts only half its weight at each quarterly rebalance and spreads the trades over five days.

Morningstar also measures company size on a date it doesn’t announce in advance. This  makes it harder for traders to buy ahead of the index funds — potentially pushing prices up, a practice called "front running."

By design, VB holds bigger companies than those in the Russell 2000. By Vanguard’s measure, half of VB’s assets sat in companies worth more than $10.9 billion as of Aug. 31, against $3.7 billion for VTWO.

Investors who want more of the smallest companies should look at VTWO or SCHA. But for a core small-cap fund, VB is our top pick: it charges 0.03%, it is part of a $175.8 billion fund, and its index rules are built to hold down trading costs.

## CHA: smaller companies, same fee

The Schwab US Small-Cap ETF (SCHA) charges the same 0.03% as VB, but casts a wider net.

Schwab's [June 2026 prospectus](https://www.sec.gov/Archives/edgar/data/1454889/000088454626000252/c497k.htm) 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. Buy VB if you want small companies. Buy SCHA if you want everything after the 750 largest, which provides more midcap exposure.

## SPSM Tracks the S&P SmallCap 600 Index. Here's how that works

The S&P SmallCap Index screens for profitability. Specifically, S&P 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.

In contrast, the Russell 2000 has no such test. S&P set both points out in an [October 2024 comparison](https://www.spglobal.com/spdji/en/documents/research/research-celebrating-30-years-of-the-sp-smallcap-600.pdf) 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.

## VTWO vs. IWM: Russell 2000 funds

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.

## AVUV: actively-managed small-cap value

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.

It returned 28.5% over the past year, handily beating VB. If you're a hard-core Boglehead, and you believe in passive strategies, VB may still be your bet. With a much higher expense ratio, it will be difficult for AVUV to sustain its. outperformance. And the value tilt introduces style risk: The fund may suffer outsized declines if markets turn against value stocks in general.

But if you're willing to accept that style exposure, and you believe that active management screens beyond cap sizes can add value net of fees over time, then AVUV may be a compelling alternative.

Smallcap growth stocks had a solid year, as well: 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%.  Growth and value smallcaps were 18.2 percentage points apart. 18.2 percentage points apart.

Chart: **AVUV** led in both windows; **VBK** trailed in both

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.

Source: etf.net, https://etf.net/news/vb-tops-small-cap-etf-picks-2026-11-02. Please cite the page URL.