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SCHA holds nearly three times the number of stocks as SPSM and provides greater exposure to the small-cap market.
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SCHA has higher one-year returns but larger five-year drawdowns.
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The expense ratio is almost the same, but SPSM offers a slightly higher dividend yield.
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both State Street SPDR Portfolio S&P 600 Small Cap ETF (NYSE: SPSM) and Schwab U.S. Small Cap ETF (NYSE: SCHA) aims to provide investors with a broad range of U.S. small-cap investment opportunities, but they take a slightly different approach.
For those considering which small-cap ETF might be the best fit, this comparison examines how their costs, performance, risk, and portfolio composition compare.
|
Metric |
SPSM |
shah |
|---|---|---|
|
Issuer |
SPDR |
Schwab |
|
expense ratio |
0.03% |
0.04% |
|
1 year return (as of January 2, 2026) |
5.32% |
11.33% |
|
dividend yield |
1.70% |
1.38% |
|
Beta version (monthly for 5 years) |
1.21 |
1.29 |
|
AUM |
$13 billion |
$19 billion |
Beta measures price volatility relative to the S&P 500 Index. The 1-year return represents the total return over the past 12 months.
SPSM is more affordable, with a slightly lower expense ratio compared to SCHA. SPSM also offers a moderately high dividend yield, which may appeal to those looking for income and growth.
|
Metric |
SPSM |
shah |
|---|---|---|
|
Maximum drawdown (5 years) |
-27.95% |
-30.79% |
|
$1,000 growth in 5 years |
$1,322 |
$1,294 |
SCHA tracks the performance of U.S. small-cap stocks using the Dow Jones U.S. Small Cap Total Stock Market Index. The fund holds 1,745 stocks, making it more diversified than many of its peers.
Its industry portfolio is led by financial services, technology and healthcare, with leadership positions including SanDisk, Lumentum Holdingsand rocket company. SCHA does not use leverage, currency hedging or ESG screening, so it is relatively straightforward for those looking for broad small-cap exposure.
By comparison, SPSM tracks the S&P SmallCap 600 Index, which includes 607 stocks. Its largest industry allocations are Financial Services, Industrials, and Technology, and its largest holdings are Arrowhead Pharmaceuticals, armstrong world industriesand Interactive Digital Corporation. Like SCHA, SPSM does not have any structural quirks or overlaps.
For more guidance on ETF investing, check out our complete guide at this link.
Investing in small-cap stocks is a smart way to diversify your portfolio and gain exposure to smaller companies with greater growth potential.
Of the two funds, SCHA has historically experienced slightly higher volatility, higher beta, and more severe maximum drawdowns. While it outperformed SPSM over the past 12 months, its five-year total return was lower.
SCHA holds nearly three times the number of shares as SPSM, providing a wider range of investment opportunities in small-cap stocks. The industry allocations of the two funds are also different. The top three sectors for both include financial services and technology, but SCHA has more healthcare stocks, while SPSM focuses more on industrials.
Finally, SPSM has advantages in both fees and dividends, with a lower expense ratio and a higher yield.
Where you choose to invest depends largely on what you hope to gain from small-cap ETFs. Historically, SCHA has been more volatile, but it also outperformed SPSM last year, and over a wider range. SPSM has slightly lower carrying costs and a higher dividend yield, and its more targeted approach has helped it outperform SCHA over the longer term.
ETF: Exchange-traded funds hold a basket of securities and trade on an exchange like stocks.
Cost ratio: Annual fund fees, expressed as a percentage of assets, net of administrative and operating costs.
Dividend Yield: The annual dividend paid by a fund or stock divided by its current share price.
Beta version: A measure of an investment’s volatility relative to the overall market (usually the S&P 500 Index).
Asset management scale: Assets under management; the total market value of all assets managed by a fund.
Maximum drawdown: The largest drop in value from peak to trough in a specific period, showing the worst historical losses.
Total return: Investment performance includes price changes plus all dividends and distributions, assuming reinvestment.
index: A rules-based basket of securities designed to track or measure a specific segment of the market.
Small cap stocks: Refers to a company with a relatively small market capitalization, usually several hundred million to billions of dollars.
Leverage: Use borrowed funds or derivatives to expand a fund’s risk exposure and potential returns or losses.
Currency Hedging: A strategy used by funds to reduce the impact of exchange rate changes on investment returns.
ESG screen: Filter to include or exclude investments based on environmental, social and governance criteria.
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Katie Brockman has no position in any of the stocks mentioned. The Motley Fool is employed by and recommended by Rocket. The Motley Fool recommends Lumentum. The Motley Fool has a disclosure policy.
SCHA vs. SPSM: Which small-cap ETF is the better choice for investors? Originally posted by The Motley Fool