SCHA vs. ISCB Comes Down to Sector Tilt and Your Drawdown Tolerance

Key Points

Both SCHA and ISCB charge a low 0.04% expense ratio but differ sharply in assets under management and trading volume

SCHA delivered a higher 1-year total return, while ISCB has a slightly smaller historical drawdown and a marginally higher dividend yield

ISCB places more emphasis on Healthcare and Industrials, whereas SCHA leans into Technology exposure

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Schwab U.S. Small-Cap ETF (NYSEMKT:SCHA) and iShares Morningstar Small-Cap ETF (NYSEMKT:ISCB) both offer broad small-cap U.S. equity exposure at a 0.04% expense ratio, but SCHA is much larger and more liquid, while ISCB offers a slightly higher yield and a modest tilt toward Healthcare and Industrials.

For investors comparing SCHA and ISCB, both funds aim to capture the performance of U.S. small-cap stocks, yet they differ in scale, sector allocation, and recent returns. This analysis explores the key differences in cost, performance, risk, and portfolio makeup to help you decide which may fit your portfolio better.

Snapshot (cost & size)

| Metric | SCHA | ISCB | |---|---|---| | Issuer | Schwab | IShares | | Expense ratio | 0.04% | 0.04% | | 1-yr return (as of 2026-04-22) | 47.1% | 38.4% | | Dividend yield | 1.1% | 1.3% | | Beta | 1.10 | 1.08 | | AUM | $22.0 billion | $268.5 million |

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.

Both ETFs are equally affordable on fees, but ISCB offers a marginally higher dividend yield. SCHA’s much larger size and higher trading volume may appeal to those prioritizing liquidity or institutional scale.

Performance & risk comparison

| Metric | SCHA | ISCB | |---|---|---| | Max drawdown (5 y) | -30.78% | -29.94% | | Growth of $1,000 over 5 years | $1,346 | $1,305 |

What's inside

ISCB tracks a broad mix of U.S. small-caps, with notable allocations to Industrials (18%), Financial Services (16%), and Healthcare (14%) as of its most recent report. The fund holds 1,554 stocks, with its largest positions in Lumentum Holdings Inc (NASDAQ:LITE), Revolution Medicines Inc (NASDAQ:RVMD), and Albemarle Corp (NYSE:ALB), each representing a small fraction of assets. With a fund age of nearly 22 years, ISCB has established a long track record.

By contrast, SCHA tilts more toward Technology (18%), alongside significant weights in Financial Services and Industrials (each 16%). Its top holdings include Sandisk Corp (NASDAQ:SNDK), Lumentum Holdings Inc (NASDAQ:LITE), and Revolution Medicines Inc (NASDAQ:RVMD). SCHA’s asset count is larger, with 1,729 holdings, suggesting slightly broader diversification within the small-cap space.

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

What this means for investors

When two funds track the same corner of the market at the same price, the decision usually comes down to conviction on the vehicle, not the strategy. Five years out, the gap between these two is $41 on a $1,000 investment — close enough that neither fund has proven a structural edge. What small-caps offer at a portfolio level is diversification away from mega-cap concentration, which has dominated large-cap indices for years, and a longer-run historical return premium that tends to materialize over decade-plus horizons, not quarters. The one meaningful difference is sector tilt: SCHA leans harder into Technology, ISCB into Healthcare — and in a significant drawdown, those behave differently. If you already have heavy Tech exposure elsewhere, ISCB's tilt offers a bit more balance. The more useful question either way is whether a 30% drop feels like a threat or an opportunity — investors who can buy into that kind of volatility rather than sell out of it will get considerably more out of whichever fund they choose.

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Seena Hassouna has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lumentum. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.