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

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

The fund is sponsored by Blackrock. It has amassed assets over $202.85 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

There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.

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

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

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 1.54%.

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 Financials sector--about 18% of the portfolio. Industrials and Healthcare round out the top three.

Looking at individual holdings, Shockwave Medical Inc (SWAV) accounts for about 0.29% of total assets, followed by Healthcare Realty Trust Inc Class (HR) and Sarepta Therapeutics Inc (SRPT).

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 lost about -16.13% so far this year and is down about -19.49% in the last one year (as of 11/11/2022). In the past 52-week period, it has traded between $42.56 and $61.01.

The ETF has a beta of 1.15 and standard deviation of 31.75% for the trailing three-year period. With about 1913 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 reasonable 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) and the iShares Core S&P SmallCap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $53.77 billion in assets, iShares Core S&P SmallCap ETF has $68.20 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds 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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iShares Morningstar SmallCap ETF (ISCB): ETF Research Reports
 
Healthcare Realty Trust Incorporated (HR) : Free Stock Analysis Report
 
Sarepta Therapeutics, Inc. (SRPT) : Free Stock Analysis Report
 
iShares Russell 2000 ETF (IWM): ETF Research Reports
 
iShares Core S&P SmallCap ETF (IJR): ETF Research Reports
 
ShockWave Medical, Inc. (SWAV) : Free Stock Analysis Report
 
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