VBR vs IWN: Best Small-Cap Value ETF Choice?

Vanguard vs. iShares: VBR or IWN Better Small-Cap Value ETF?

Expense ratios, sector allocations, and portfolio characteristics distinguish these two prominent small-cap value exchange-traded funds, helping investors decide on their optimal choice for portfolio inclusion.

The primary distinctions between Vanguard Small-Cap Value ETF (VBR) and iShares Russell 2000 Value ETF (IWN) lie in their expense ratios, sector weightings, and performance histories, where IWN demonstrates greater emphasis on financial services alongside a superior one-year performance figure.

Each of these ETFs seeks to deliver comprehensive access to American small-cap value equities, yet they follow distinct benchmarks and reveal significant variations in holdings composition, fees, and volatility profiles. Investors evaluating these well-regarded funds can benefit from the detailed examination provided below to identify the most suitable option for their investment objectives.

Snapshot: Costs and Scale

• Issuer: VBR – Vanguard; IWN – iShares
• Expense ratio: VBR – 0.07%; IWN – 0.24%
• 1-year return (as of Dec. 18, 2025): VBR – 10.1%; IWN – 14.5%
• Dividend yield: VBR – 1.97%; IWN – 1.57%
• Beta: VBR – 1.12; IWN – 1.20
• AUM: VBR – $59.6 billion; IWN – $11.8 billion

Beta quantifies price fluctuations in relation to the S&P 500, derived from five-year weekly returns. The one-year return encompasses total return across the preceding 12 months.

VBR presents a more budget-friendly profile with its 0.07% expense ratio versus IWN’s 0.24%, complemented by a marginally superior dividend yield that may attract those prioritizing income generation.

Performance and Risk Assessment

• Max drawdown (5 years): VBR – -24.2%; IWN – -26.7%
• Growth of $1,000 over 5 years: VBR – $1,687; IWN – $1,555

Portfolio Composition

IWN follows an index comprising 1,407 U.S. small-cap stocks exhibiting value traits, allocating 26% to financial services, 12% to real estate, and 11% to industrials. Key holdings such as Echostar, Hecla Mining, and UMB Financial each constitute under 1% of the total assets. With a 25-year performance history, IWN offers extensive data for thorough evaluation.

Conversely, VBR encompasses 841 stocks, with heavier weighting toward industrials at 19%, financial services at 18%, and consumer cyclicals at 13%. Its top investments, including NRG Energy, Sandisk, and EMCOR Group, maintain relatively small individual positions. VBR’s sector distribution shows somewhat greater concentration.

Key Points

• IWN has achieved a higher one-year total return compared to VBR, though it lags behind over five years.
• VBR maintains a significantly lower expense ratio than IWN, making it attractive for those focused on minimizing costs.
• The ETFs exhibit different sector preferences: IWN favors financials and real estate, whereas VBR prioritizes industrials and consumer cyclicals.

Implications for Investors

From inception in 2004, VBR has produced annualized total returns of 9.2%, surpassing IWN’s 7.8%. Beyond this long-term edge, VBR stands out as the preferable choice due to several advantages:

• An expense ratio approximately one-third that of IWN
• Modestly reduced beta and maximum drawdown
• Higher dividend yield
• Decreased reliance on the financial sector
• Increased weighting in consumer sectors
• Substantially larger assets under management

For many, VBR represents a comprehensive victory, notwithstanding IWN’s broader diversification with nearly double the number of holdings. Investors seeking extensive coverage of regional banks or REITs might find IWN more aligned with their goals.

IWN remains a solid ETF worthy of consideration, with the final decision hinging on individual preferences. That said, in a direct comparison, VBR proves to be the stronger small-cap value ETF for long-term acquisition and retention strategies.

Glossary

• ETF: Exchange-traded fund; a collective investment vehicle traded on exchanges similar to individual stocks.
• Expense ratio: Annual operating fee expressed as a percentage of fund assets.
• Dividend yield: Annual dividends divided by current share price, shown as a percentage.
• Beta: Metric assessing volatility relative to the broader market, usually the S&P 500.
• AUM: Assets under management; total value of investor funds overseen by the ETF.
• Max drawdown: Greatest peak-to-trough decline in fund value over a defined timeframe.
• Small-cap: Companies with market capitalizations generally ranging from $300 million to $2 billion.
• Value characteristics: Indicators of undervaluation, like low price-to-earnings or price-to-book ratios.
• Sector tilt: Over- or under-weighting of specific industries relative to a benchmark.
• Consumer cyclicals: Businesses sensitive to economic cycles, such as retail and automotive firms.
• Total return: Price appreciation plus reinvested dividends and distributions.
• Index: Benchmark tracking a selection of securities for performance measurement or replication.