Which Small-Cap Growth ETF Wins: VBK or IJT? A Closer Look at Performance, Costs, and Volatility

Performance Face-Off: VBK Takes the 12-Month Crown, But at What Cost?

When comparing the Vanguard Small-Cap Growth ETF (VBK) and the iShares S&P Small-Cap 600 Growth ETF (IJT), one fund clearly outpaced the other recently. Over the trailing 12 months, VBK delivered a solid 12.47% return, significantly outperforming IJT’s 8.63%. Yet this superior short-term performance masks a crucial reality: VBK achieved this through substantially higher volatility.

The five-year max drawdown tells a sobering story. VBK experienced a devastating -38.39% decline at its worst point, compared to IJT’s more moderate -29.23% peak-to-trough loss. For investors who couldn’t stomach a near-40% portfolio collapse, that difference matters tremendously. VBK’s beta of 1.43 versus IJT’s 1.18 confirms the disparity—VBK swings roughly 43% more violently than the broader market.

Expense Ratios: The Cost of Growth Varies Dramatically

Here’s where VBK’s appeal becomes undeniable. At just 0.07% annually, VBK charges less than half what IJT demands at 0.18%. For every $10,000 invested, you’ll pay $7 in yearly fees with VBK versus $18 with IJT. Across a $100,000 portfolio over 10 years, that difference compounds to meaningful savings—especially when small-cap funds already carry higher inherent costs than their large-cap counterparts.

However, VBK’s lower cost doesn’t translate to higher income. IJT yields 0.91% in dividends, compared to VBK’s 0.54%—a nearly 70% difference that appeals to income-focused investors seeking consistent payouts from their small-cap exposure.

Portfolio Construction: Tech Concentration vs. Balanced Diversification

The funds diverge significantly in how they construct their portfolios. VBK holds 552 stocks spread across the small-cap space, but leans heavily into technology at 27% of assets. Industrials occupy 21%, while healthcare rounds out the top three at 18%. Top holdings like Insmed, Comfort Systems USA, and SoFi Technologies reflect this tech tilt.

IJT takes a different approach with 348 holdings and more even sector weighting: technology (20%), industrials (19%), and healthcare (17%). Companies like Arrowhead Pharmaceuticals, Armstrong World Industries, and InterDigital suggest a more balanced growth orientation, reducing concentration risk in any single sector.

For investors interested in broader microcap ETF exposure alongside traditional small-cap vehicles, this distinction becomes important. VBK’s tech overweight could deliver outsized gains in bull markets but amplify losses during tech downturns. IJT’s balanced approach provides steadier, if sometimes less spectacular, returns.

Assets Under Management: Size Matters

VBK dwarfs IJT with $39 billion in assets versus IJT’s $6.5 billion. This scale advantage means better liquidity, tighter bid-ask spreads, and lower trading costs for frequent investors. Larger funds also tend to attract more analyst attention and institutional flows, potentially creating better exit opportunities.

The Verdict for Different Investor Types

For aggressive growth seekers willing to tolerate volatility: VBK’s superior 12-month returns, significantly lower fees, and technology-forward positioning make it the logical choice. You’re paying less annually while capturing more upside in growth periods.

For conservative small-cap investors prioritizing income and stability: IJT’s higher dividend yield, lower volatility, and more balanced sector allocation justify the higher fee. The 0.91% yield provides a meaningful income cushion during market downturns.

The five-year performance reality: A $1,000 investment in VBK grew to $1,155, while the same sum in IJT reached $1,227. IJT’s steadier approach actually delivered superior wealth accumulation despite lower annual returns, suggesting that volatility’s compounding damage offset VBK’s performance edge.

Both funds capture the small-cap growth opportunity effectively, whether your priority is cost efficiency, income generation, or sector balance. Your choice should align with your volatility tolerance and investment timeline rather than recent short-term performance alone.