Should iShares Morningstar Small-Cap ETF (ISCB) Be on Your Investing Radar?

Launched on June 28, 2004, the iShares Morningstar Small-Cap 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 $257.42 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.

Blend ETFs usually hold a mix of growth and value stocks as well as stocks that exhibit both value and growth characteristics.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

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

It has a 12-month trailing dividend yield of 1.26%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector -- about 20.8% of the portfolio. Financials and Information Technology round out the top three.

Looking at individual holdings, Astera Labs Inc (ALAB) accounts for about 0.51% of total assets, followed by Rocket Lab Corp (RKLB) and Ionq Inc (IONQ).

The top 10 holdings account for about 3.75% 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 return is roughly 12.24% so far this year and was up about 13.62% in the last one year (as of 10/28/2025). In the past 52-week period, it has traded between $47.12 and $65.26.

The ETF has a beta of 1.12 and standard deviation of 20.42% for the trailing three-year period. With about 1565 holdings, it effectively diversifies company-specific risk.

Alternatives

iShares Morningstar Small-Cap 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 Small-Cap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $70.65 billion in assets, iShares Core S&P Small-Cap ETF has $87.57 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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This article originally published on Zacks Investment Research (zacks.com).

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