Small-Cap Showdown: How Vanguard's VB Compares to Schwab's SCHA on Fees, Risk, and Diversification

This comparison looks at two of the most popular small-cap index ETFs, each offering broad exposure to U.S. smaller companies.

The Schwab U.S. Small-Cap ETF (SCHA 1.91%) and the Vanguard Small-Cap ETF (VB 1.80%) both contain a diversified selection of U.S. small-cap stocks, but they differ on size, risk profile, and sector tilts, giving investors a few notable trade-offs to consider.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.

SCHA is slightly more affordable on fees with a lower expense ratio, while VB offers a marginally higher dividend yield. Both figures are so close, though, that most investors likely won’t notice a meaningful difference between the two funds.

Performance & risk comparison

What’s inside

VB tracks the CRSP US Small Cap Index, providing exposure to 1,324 holdings. The portfolio is well-diversified, with the largest sector weights in industrials (making up 19% of assets), technology (18%), and financial services (13%).

Its top positions include Rocket Companies, Sandisk, and Ciena. Each stock represents less than 1% of assets, which helps limit single-stock risk.

SCHA, by contrast, leans more on financial services (17%), technology (17%), and healthcare (16%). It holds a broader basket of 1,740 stocks, with its largest positions being Sandisk, Lumentum, and Rocket Companies. Like VB, each of its holdings makes up less than 1% of total assets.

Neither fund uses leverage, currency hedging, or environmental, social, and governance (ESG) screens, so both remain plain-vanilla small-cap index options.

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

What this means for investors

Both VB and SCHA contain a well-diversified mix of small-cap stocks. Neither is significantly tilted toward any one industry, though they do differ in their top sectors. Investors seeking more exposure to industrials may prefer VB, while those more focused on financial services and healthcare might opt for SCHA.

Historically, SCHA has been slightly more volatile than VB, with a higher beta and marginally deeper max drawdown — indicating more significant price fluctuations. It outperformed VB over the last 12 months, but its total returns over the past five years have fallen slightly below VB’s.

The funds’ expense ratios and dividend yields are very similar, so those factors likely won’t make a significant difference in choosing between them. However, they do differ substantially in their assets under management (AUM).

VB offers a much higher AUM, which can provide greater liquidity and make it easier for investors to buy and sell large amounts without affecting the ETF’s price. This may not be much of a selling point for long-term investors who don’t plan to trade often, but as one of the few notable differences between the two ETFs, it’s a point to consider.

Glossary

ETF: Exchange-traded fund that holds a basket of securities and trades on an exchange like a stock.
Small-cap: Companies with relatively low stock market value, typically offering higher growth potential and higher risk.
Index ETF: ETF designed to track a specific market index’s performance by holding its underlying securities.
Expense ratio: Annual fund fee, expressed as a percentage of assets, covering management and operating costs.
Assets under management (AUM): Total market value of all assets an investment fund or manager oversees.
Dividend yield: Annual dividends paid by a fund or stock divided by its current share price.
Beta: Measure of an investment’s volatility relative to the overall market, often compared to the S&P 500.
Max drawdown: Largest peak-to-trough decline in an investment’s value over a specified period.
Total return: Investment performance including price changes plus all dividends and distributions, assuming reinvestment.
Sector allocation: How a fund’s holdings are distributed across different industries, such as technology or financials.
Leverage (in funds): Use of borrowed money or derivatives to amplify returns, which also increases potential losses.
Currency hedging: Strategy used by funds to reduce the impact of exchange-rate movements on investment returns.