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Should iShares Morningstar SmallCap ETF (ISCB) Be on Your Investing Radar?

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Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the iShares Morningstar SmallCap ETF (ISCB - Free Report) is a passively managed exchange traded fund launched on 06/28/2004.

The fund is sponsored by Blackrock. It has amassed assets over $207.17 million, making it one of the average sized ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.

Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.04%, making it the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.55%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 17.30% of the portfolio. Financials and Healthcare round out the top three.

Looking at individual holdings, Lattice Semiconductor Corp (LSCC - Free Report) accounts for about 0.27% of total assets, followed by Exact Sciences Corp (EXAS - Free Report) and Penumbra Inc (PEN - Free Report) .

The top 10 holdings account for about 2.43% of total assets under management.

Performance and Risk

ISCB seeks to match the performance of the MORNINGSTAR US SMALL CAP EXTENDED INDEX before fees and expenses. The Morningstar US Small Cap Extended Index comprises of small-capitalization U.S. equities.

The ETF has added about 5.59% so far this year and is down about -13.28% in the last one year (as of 01/12/2023). In the past 52-week period, it has traded between $42.56 and $55.69.

The ETF has a beta of 1.13 and standard deviation of 32.05% for the trailing three-year period. With about 1807 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Morningstar SmallCap ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, ISCB is a sufficient option for those seeking exposure to the Style Box - Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 ETF (IWM - Free Report) and the iShares Core S&P SmallCap ETF (IJR - Free Report) track a similar index. While iShares Russell 2000 ETF has $53.35 billion in assets, iShares Core S&P SmallCap ETF has $68.05 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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