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In this post, let’s cover top 4 small-cap growth ETFs for exposure to small growth stocks in your investment portfolio.

What Are Small-Cap Stocks?

What do I mean by small-cap and growth stocks? So, let’s quickly unpack that. Small-cap or small market capitalization stocks are companies with market capitalization less than $2-$3 billion. Anything above $2-$3 billion is either mid or large-cap stock. This number does not stay stagnant over time though. For example, if we take 10 years ago, a typical small-cap stock would probably be anything below $1 billion.

Let’s put things in perspective. You heard about Nvidia? I mean who have not. It is a large-cap stock with a market capitalization of a whopping $4.5 trillion (as of January 2026). That’s like more than 1000x bigger than a typical small-cap stock.

If you ask economists, they will tell you that small-cap stocks have done better than large-cap stocks. This has been true over very long periods like 20 or 30 years. But, that’s a statement from the past. Over shorter periods of time, this relationship can break down. That’s what famous economists Fama and French documented in their 2018 paper.

For instance, here is a graph that shows returns of large-cap vs small-cap stocks.

Since 1999, small-cap stocks indeed outperformed large-cap ones. But, then, if we start zooming in, that lead begins to look less impressive. Over 10 years, large-caps smoked small-cap stocks. Same for five years.

So, investing in small-cap stocks requires a lot of patience and waiting. And, even with that, it is not guaranteed that they will stage a comback. I just wanted to be honest with you here. Small-cap stocks are not some miracle investment that will make you a fortune overnight. They are very risky too.

A small company has less money and human resources than a large one. A small enterprise is just steps away from going bankrupt if its products do not take off. So, that’s why small-cap stocks outperform large-cap stocks. They are riskier and investors demand higher compensation for taking that risk.

What Are Growth Stocks?

Now, let’s talk about growth stocks. These are companies with above average growth rates for sales and earnings. For instance, over the last five years, a sales growth rate for an average US public company in the S&P 500 has been 8%. Earnings growth has been 10%. Pretty good, right. But what about growth stocks? They showed historical sales growth of 12% and earnings growth of 22%. That’s over 2x higher earnings growth.

Growth stocks tend to be expensive too. For instance, you probably heard about price to earnings or P/E ratio. It is just a company’s market capitalization divided by its net income. Basically, it shows how investors value a given company prospect to increase its earnings in the future. Growth stocks tend to have very high P/E ratios. For instance, a typical large-cap growth stock trades at P/E of 30x or even higher.

Conversely, we have value stocks. Value stocks are companies that don’t show explosive growth rates and trade at low P/E. A typical large-cap value stock would have a P/E ratio of around 14-15x. That’s like 2x less than for a growth stock. The idea here is that value stocks are so underappreciated, that investors realize at some point how great they are and their stock prices go up. Fingers crossed.

Historicallly, value stocks have done better than growth.

But, this relationship has broken down too as with small vs large stocks. The gap is becoming so wide and that some wonder if value will ever catch up to growth? For instance, since 1999, MSCI growth index outperformed value by over 2x. Most of that outperformance happened since 2020.

US Stock Market Concentration At All Time High

Let’s come back to small-cap size. As an investor I do want exposure to this segment of the US stock market. Why would I do that? Here is the thing. The US stock market grew very concentrated with large companies like Microsoft, Apple and Nvidia dominating the landscape. The S&P 500 top 10 stock exposure is at all time high of 40%. This high concentration amplifies both future gains and losses.

If you invest in the S&P 500 index fund, your exposure to small cap stocks will be around 1%. That’s like nothing. Total stock market funds like Vanguard’s VTI are bit better with about 8% exposure to small-cap stocks. Still, that’s very low. So, that’s another reason to increase exposure to small-cap stocks.

How Growth Fared in Small-Cap Space?

Growth stocks in the small-cap space have historically done better. This chart below shows cumulative returns for Vanguard funds tracking growth, value and blend subsets of the the Russell 2000 index. Blend stocks is exactly what it is: a mix of growth and value.

We see that on average, small-cap growth stocks have done better since 2010. But, note how growth stocks showed huge drawdowns with lots of ups and downs. The thing is that growth stocks tend to have those high multiple ratios like price-to-earnings for a reason. Investors expect a lot from them with their opinions and forecasts.

But, these are just forecasts and opinions. If these opinions turn out to be wrong, those ups and downs are inebitable. That’s something to keep in mind if you decide to invest in any of the funds on today’s list. You must have a stomach to live through these painful bear market episodes.

Best Small-Cap Growth ETFs

The best small-cap growth ETFs I chose for this post are:

1. Vanguard Small-Cap Growth Index Fund ETF Shares (VBK)
2. Vanguard S&P Small-Cap 600 Growth Index Fund ETF (VIOG)
3. Vanguard Russell 2000 Growth ETF (VTWG)
4. iShares Morningstar Small-Cap Growth ETF (ISCG)

1. Vanguard Small-Cap Growth Index Fund ETF (VBK)

The first small-cap growth fund on today’s list is VBK by Vanguard. VBK is incredibly cheap at only 0.07% fee with a gold medalist rating from Morningstar. It ranks stocks based on earnings growth, price to book and price to sales ratios and invests in the most expensive half. The result is a portfolio of close to 600 stocks with a low top 10 stock concentration of 10%.

One important thing to remember about this fund is that it allocates a lot to mid-cap stocks.

The number is around 38%. That’s like 20% more than what a typical small growth fund does. The benefit of this is lower volatility since mid-cap stocks are less risky. But, the disadvantage is that VBK won’t give you a true exposure to small-cap growth stocks only.

VBK leans heavy on small-cap tech stocks with almost 27% allocation.

Industrial and healthcare stocks follow next. But, other than this, VBK sector allocations are in line with its peers.

2. Vanguard S&P Small-Cap 600 Growth Index ETF (VIOG)

The second small cap growth fund is VIOG also by Vanguard. There are two other funds that do exactly the same thing as VIOG. These are IJT by iShares and SLYG by State Street. I chose VIOG because it is cheaper, charging only 0.10% fee with silver medalist rating from Morningstar.

The main rule that VIOG insists on is profitability. If a company did not turn a profit, VIOG avoids it. Small, unprofitable growth companies are great when times are good. But, when sentiment sours, they go down and may stay down for long. This profitability filter is unique to VIOG. I don’t see it often.

But, keep in mind that the fund is forced to work with fewer companies. As a result its portfolio does not show the highest exposure to growth. It has a pronounced value tilt as we see here.

On top of it, it holds about 350 stocks with the top 10 stock concentration at 11%.

Interestingly, because VIOG excludes unprofitable companies, its sector allocations are different. Its exposure to tech and industrial sectors are lower. It compensates that with higher allocation to consumer cyclical and financial equities.

3. Vanguard Russell 2000 Growth ETF (VTWG)

The second fund on my list is VTWG by Vanguard. An ETF doing the same thing would be IWO by iShares. Both VTWG and IWO are passive funds tracking the popular Russell 2000 Growth index. VTWG just happens to be the cheapest one at 0.12% fee. The fund has a bronze medalist rating from Morningstar.

VTWG ranks stocks based on a mix of price-to-book ratio, earnings and sales forecasts. The fund invests in stocks that land in the most expensive half. Note how there is no profitability filter here. Many unprofitable and risky companies make their way into VTWG portfolio. For this reason, as we will see shortly, VTWG shows above average volatility of returns.

The fund holds a very large number of stocks close to 1100 with top 10 concentration at 10%. Keep in mind that VTWG allocates a bit more to mid-cap stocks. That’s why its average market cap is a little higher at $4.1 billion, but not as high as for VBK ETF at $10.1 billion.

Sector allocations for this fund are very typical, but with the exception of healthcare. VTWG admits many more risky and unprofitable biotech companies. Hence, it healthcare sector exposure is way higher. And so its risk.

4. iShares Morningstar Small-Cap Growth ETF (ISCG)

And the last small-cap growth ETF on my list is ISCG by iShares. The fund charges a very small 0.06% fee and comes with a bronze medalist rating from Morningstar. The fund will give a different take on small growth exposure due to how it defines small size and growth based on Morningstar methodology.

Without going into too much details, here is the gist. ISCG scores stocks based on 10 factors.

Among them are many valuation multiples, historical and projected growth rates. The selection process is meticulous and way more sophisticated compared to other funds. Also, ISCG will invest only in the bottom 9.5% of US stock ranked by the market cap.

The result is a collection of over 900 names with the top 10 concentration of only 5%. That’s the lowest number on my list.

ISCG’s sector allocations are similar to its peers. Although, it allocates a bit less to tech stocks, but more to real estate equities.

ISCG vs. VIOG vs. VTWG vs. VBK Returns

If we compare total returns for these four funds, surprisingly, we see that their cumulative total returns have not been too materially different since 2010.

Although we see that VIOG took a lead here and there. I think a lot of that had to do with how VIOG screens out unprofitable companies and has a higher tilt to value of the four ETFs.

If we look at volatility-adjusted returns for the past 10 years, here is what we see.

Unsurprisingly, VTWG ETF showed higher volatility as measured by the standard deviation of returns. That has hurt its Sharpe ratio. Sharpe ratio takes returns and divides them by standard deviation. So, a fund with lower volatility will have higher Sharpe ratio keeping other things constant. Surprisingly, ISCG did very well and close to VBK on volatility adjusted basis.

ISCG vs. VIOG vs. VTWG vs. VBK Summary

All four funds are passive index funds. They charge very reasonable and low fees. VIOG and VTWG invests in some of the smallest companies. Hence, their average market is low. But, VBK allocates a lot to mid-cap stocks. So, its average market cap is quite high.

Only VIOG screens out unprofitable companies. But, surprisingly that did not give it any meaningful edge over other funds. That’s unlike what I have seen with small-cap value or small-cap blend funds. It seems that profitability filter made some difference there, but not here.

At the same time, it looks like VIOG has the biggest tilt away from growth and to value factor as we see from its valuation multiples. Finally, only VBK is rated with gold medalist rating by Morningstar.

I don’t think you will go wrong with either of these funds. Although they cater to slightly different groups of investors. If mid-cap exposure is okay with you, VBK is an excellent choice. Conversely, VIOG is appealing to more risk-conscious investors by controlling for profitability in its portfolio.

Conversely, both ISCG and VTWG cast a wide net over many more small-cap stocks with growth focus. Although, VTWG admits more unprofitable and tiny companies into its portfolio as evidenced by its negative return on capital.

Investors Takeaways

On a final note, I was quite surprised how fewer small-cap growth ETFs are out there. There are many other small-cap blend or small-cap value funds. I guess small-cap growth category is not very popular among investors. Maybe, it is too risky for most.

The goal for this post was to choose ETFs with proven track record, low fees and established asset base. There were many other unproven or expensive small-cap growth funds that I chose to overlook.

If you would like to see the entire list and do research on your own, check out Morningstar linked below. It is an excellent resource to research funds and stocks that I use all the time.