6 Best Small-Cap ETFs To Invest In Right Now

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Small-cap stocks represent publicly traded companies with relatively smaller market capitalizations, typically ranging from a few hundred million dollars to a few billion. Historically, this segment of the market has offered higher long-term growth potential than large-cap stocks, though with greater volatility along the way.

According to S&P Dow Jones Indices, small-cap stocks have delivered periods of outperformance relative to large caps during economic recoveries, when smaller companies tend to benefit more from expanding credit conditions and domestic growth.

For investors, small-cap ETFs offer an efficient way to gain diversified exposure without relying on individual stock selection.

At a Glance: Best Small-Cap ETFs

ETF	Ticker	Index Tracked	Risk Profile	Why It Stands Out
iShares Russell 2000 ETF	IWM	Russell 2000	High	Most widely used small-cap ETF
Vanguard Small-Cap ETF	VB	CRSP U.S. Small Cap	High	Low cost and broad diversification
Schwab U.S. Small-Cap ETF	SCHA	Dow Jones U.S. Small-Cap	High	Competitive expense ratio
SPDR S&P SmallCap 600 ETF Trust	SLY	S&P SmallCap 600	High	Emphasizes profitability screens
iShares Core S&P Small-Cap ETF	IJR	S&P SmallCap 600	High	Low-cost access to profitable small caps

Expense ratios and index methodologies are based on current fund prospectuses and index provider disclosures.

What Makes Small-Cap ETFs Different?

Small-cap ETFs focus on companies earlier in their growth cycle. According to the U.S. Securities and Exchange Commission, smaller companies often experience larger price swings due to limited operating history, narrower profit margins and greater sensitivity to economic changes.

Because of this, small-cap ETFs are typically used as growth-oriented or satellite allocations, rather than core portfolio holdings.

Best Small-Cap ETFs To Consider

iShares Russell 2000 ETF (IWM)

IWM tracks the Russell 2000 Index, which includes approximately 2,000 U.S. small-cap stocks. According to FTSE Russell, the index represents about 8% of the total U.S. equity market by capitalization. IWM is highly liquid, making it popular among both long-term investors and traders.

Vanguard Small-Cap ETF (VB)

VB tracks the CRSP U.S. Small Cap Index and carries a low expense ratio, according to Vanguard’s official fund profile. The ETF offers broad exposure across sectors, reducing reliance on any single industry. Its structure makes it well-suited for long-term investors seeking cost efficiency.

Schwab U.S. Small-Cap ETF (SCHA)

SCHA follows the Dow Jones U.S. Small-Cap Total Stock Market Index. According to Charles Schwab Asset Management, the fund is designed to capture a wide range of small-cap companies while maintaining low operating costs. It’s often favored by investors already using Schwab brokerage accounts.

SPDR S&P SmallCap 600 ETF Trust (SLY)

SLY tracks the S&P SmallCap 600 Index, which requires constituent companies to meet profitability criteria, according to S&P Dow Jones Indices. This screen can reduce exposure to unprofitable firms, potentially lowering risk compared to broader small-cap indexes.

iShares Core S&P Small-Cap ETF (IJR)

IJR also tracks the S&P SmallCap 600 Index but with a lower expense ratio, according to BlackRock’s fund disclosures. It’s often used as a long-term holding for investors who want small-cap exposure with a profitability tilt.

How Small-Cap ETFs Fit Into a Portfolio

Research from Fama and French and data published by the Federal Reserve Bank of St. Louis show that small-cap stocks have historically carried a “size premium,” meaning higher long-term returns accompanied by higher volatility.

Because of this trade-off, financial professionals often recommend keeping small-cap exposure moderate and diversified.

Risks To Keep in Mind

Small-cap ETFs are more sensitive to economic slowdowns, rising interest rates and tighter credit conditions. They may underperform large-cap stocks during market stress.

According to the SEC, investors should be prepared for larger drawdowns and longer recovery periods when investing in smaller companies.

Final Take to GO

Small-cap ETFs can enhance long-term growth potential and diversification, but they aren’t low-risk investments. Broad, low-cost funds like VB, IWM or IJR offer diversified exposure, while S&P SmallCap 600-based ETFs emphasize profitability.

The best choice depends on your risk tolerance, time horizon and overall portfolio strategy.

Data is accurate as of Jan. 20, 2026, and is subject to change.

Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.

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