Controlling Risk Makes This Small-Cap ETF One of the Best

Key Morningstar Metrics for iShares Core S&P Small-Cap ETF

• Morningstar Medalist Rating
  : Gold
• Process Pillar
  : Above Average
• People Pillar
  : Above Average
• Parent Pillar
  : Above Average

IShares Core S&P Small-Cap ETF’s IJR low fee, broad diversification, and profitability bias make it hard to beat.

This exchange-traded fund tracks the S&P SmallCap 600 Index, which collects the smallest 600 stocks in the S&P 1500 Composite Index. Each constituent must meet initial market-cap, liquidity, and profitability criteria to be eligible. The final portfolio weights each stock by its float-adjusted market cap.

Market-cap weighting is an efficient way to allocate the portfolio because it harnesses the market’s consensus opinion of each stock’s relative value. Faster-growing companies take up a larger share of the portfolio, while smaller companies that may be struggling take on a less important role. This helps rein in turnover and the associated trading costs.

The S&P SmallCap 600 Index operates in the smaller end of the small-cap market. Its average market cap was $3.8 billion as of May 2026, which is smaller than most index-tracking competitors. Small-cap stocks tend to be more volatile than their larger peers. However, the fund’s parent index, the S&P 1500 Composite, only includes profitable names. This removes the lowest-quality small-cap stocks and helps contain excessive volatility.

While the smaller names that constitute this portfolio can be volatile, the strategy’s broad reach ensures that one stock’s misfortune should not derail the entire portfolio. It stashes just 6% of its assets in its top 10 holdings.

IShares Core S&P Small-Cap ETF: Performance Highlights

That breadth helped iShares Core S&P Small-Cap ETF return 10.8% annualized over the 10 years through April 2026, about 1 percentage point better than the small-blend Morningstar Category norm.

During market rallies, smaller stocks can rise quickly, boosting the fortunes of funds targeting the smallest end of the market. The strategy has been a beneficiary, capturing more than 100% of the average US small-blend fund’s upside. Small but high-flying stocks proved especially helpful to the strategy in recent years. However, since this fund sells holdings that graduate from small-cap territory, it may not receive the stock’s full benefit.

Small-cap funds tend to be quite volatile, and this strategy is no exception. Its focus on the smallest names in the small-cap market can make for an especially bumpy ride. But its profitability screen brings volatility back to reasonable levels, supporting strong risk-adjusted returns. The index was only 6% more volatile than its average US category peer over the 10 years through April 2026, helping it post a better risk-adjusted return.

The ETF’s low fee presents a low hurdle for outperformance, and sound diversification spreads risk. Its profitability bias should also control risk in what can be an especially volatile arena. These compelling features position the ETF for long-term outperformance.