Schwab and Vanguard Small Cap ETFs Outperformed More Liquid iShares ETFs (IWM, IWO, IWP, SCHA, VB, IJR)
U.S. small cap stocks have been doing well recently. In fact, small cap blend (NYSE:IWM) has a 24.15% 52-week return. Only the Smallcap Growth (NYSE:IWO) and Midcap Growth (NYSE:IWP) have the higher 52-week returns. For more detailed performance, please refer to here.
Smallcap Blend (IWM) is now ranked as second in the following U.S. equity style trend score table.
|Russell Smallcap Growth||(IWO)||14.99%||17.86%||v|
|Russell Smallcap Index||(IWM)||12.96%||16.32%||v|
|Russell Midcap Growth||(IWP)||12.68%||15.65%||v|
|Russell Smallcap Value||(IWN)||11.71%||15.18%||v|
|Russell Midcap Indedx||(IWR)||11.39%||14.3%||v|
|Russell Midcap Value||(IWS)||10.81%||13.86%||v|
|Russell Largecap Growth||(IWF)||10.19%||12.42%||v|
|Russell Largecap Index||(IWB)||9.41%||11.89%||v|
|Russell Largecap Value||(IWD)||9.36%||11.94%||v|
The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).
To gain exposures in US Small Cap stocks, one can choose one of the five ETFs listed in the following table, among other ETFs in this category. These five ETFs have the highest average trading volumes in the Small cap stock ETFs category.
Let’s review their performance:
|Vanguard Small Cap ETF(VB)||28.25%||8.18%||4.25%||127.83%||219|
|iShares S&P SmallCap 600 Index(IJR)||26.7%||7.1%||3.13%||122.73%||626|
|iShares Russell 2000 Index(IWM)||26.68%||7.21%||2.67%||117.63%||49,700|
|iShares Russell Microcap Index(IWC)||25.51%||3.91%||-1.65%||100.14%||212|
|Schwab U.S. Small-Cap ETF(SCHA)||30.17%||NA||NA||133.31%||223|
From the above table, it is very clear that Schwab ETF (NYSE:SCHA) achieved highest 1 year return and highest Sharpe ratio (1.33). Since Schwab ETF was created in 11/2009, it has shortest history and thus its 3 year and 5 year performance can not be compared. But its extra 2% return in the last one year is impressive.
If we expand the time horizon, Vanguard Small Cap ETF (NYSE:VB) stands out as a clear winner, in both last 3 and 5 years. Compared with iShares S&P SmallCap 600 (NYSE:IJR), in the last 5 years, VB gave investors extra 1.12% annually. This is something not very insignificant. What is more, if one compares VB with the most popular iShares Russell 2000 Index ETF (NYSE:IWM), VB returned extra 1.58% annually! This extra return can not be explained by the low expense ratio in VB alone, as VB has 0.12% expense, compared with IJR’s 0.2%.
The takeaway is that investors should pay attention to the performance among ETFs, even in the same category. The 1-2% annual return difference is striking. A systematic and periodic review of these ETFs can definitely improve portfolio performance.
LTI Systems, Inc. is the operator of MyPlanIQ.com and ValidFi.com. The founders of LTI Systems have extensive technology and business background in computer and semiconductor industries. They have been using the strategies provided by MyPlanIQ for their own personal retirement and taxable investments. The mission of LTI Systems is to make wealth management investment strategies that are used to be only accessible to institutions and high net worth individuals available to private investors with a fraction of flat cost and ease of use. The founders of LTI Systems, investors themselves, take pride in creating such a system and service for investors by taking the perspective from the investor side. They are using the system and the strategies for their own investment and align their interests with their customers.
MyPlanIQ’s blog provides periodical articles to discuss issues related to retirement plans (401(k), 403(b) and IRAs), deferred compensation plans (457), college savings plans (529), taxable brokerage investment accounts, variable annuities and universal life insurance plans. It also covers investment strategies, specifically strategic and tactical asset allocation and investment products such as ETFs and mutual funds. In addition, it syndicates daily articles that are related to retirement planning, personal finance, investment strategies, annuities, insurance, college savings and market/economic outlooks. It provides a comment and discussion community for readers.