IWM vs. IJR: Two Small Cap ETFs That Own Very Different Companies. Here Is Which One to Buy.

"The iShares Russell 2000 ETF tracks the Russell 2000 index, which comprises the 2,000 smallest companies after the largest 1,000 have been excluded. There is no profitability requirement, and a company that has never earned a dollar of profit can sit inside this fund indefinitely as long as it meets the size criteria."

"Roughly 40% of the iShares Russell 2000 ETF's holdings are currently unprofitable. Currently, healthcare leads the sector mix at 17.56%, followed by industrials at 16.84%, financial services at 15.65%, and technology at 15.16%."

"The iShares Core S&P Small-Cap ETF tracks the S&P SmallCap 600, which requires demonstrated profitability, thus providing a different risk profile and performance trajectory compared to the Russell 2000 ETF."

In 2026, small-cap ETFs are performing better than expected, with the iShares Russell 2000 ETF up 2.26% and the iShares Core S&P Small-Cap ETF up 4.53%. Both funds outperform the broader market, but they differ in methodology. The Russell 2000 ETF includes unprofitable companies, while the S&P Small-Cap ETF requires profitability. This distinction affects returns, risk profiles, and long-term performance, making it crucial for investors to understand the differences between the two funds.

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