15 Jun 3 Small Cap ETF Funds for Investors Seeking High Growth and Diversified Risk!
Small Cap companies, as the name suggests, are companies with a capitalization between $300 million to $2 billion. Market Capitalization refers to the market value of a company’s outstanding shares and is used to categorize stocks into large, mid and small-cap. Investing in Small cap stocks offer numerous advantages such as ample growth potential, greater return on investments due to market inefficiencies in pricing, less influence from financial institutions such as hedge funds on the pricing of the stock to name a few. 3 Small Cap ETF Funds
There are some drawbacks as well, such as high-risk profile, limited availability of research and information, lower liquidity among others. However, historically these stocks have demonstrated better performance and returns as compared to large cap stocks and therefore attract a lot of interest.
Small-Cap Exchange-Traded Funds invest specifically in a basket of small-cap companies, thereby reducing the risk associated with trading in individual stocks while enabling a greater diversification for the investor. According to Investopedia there are 45 small-cap ETFs that trade in the U.S excluding inverse and leveraged ETFs and those with less than $50 million in assets under management (AUM).
We take a look at the best-performing small-cap ETF’s below:
iShares Russell 2000 ETF (NYSEArca: IWM)
Current Price: $231.02
52-week range: $136.29 – $234.53
Assets Under Management: $67.69B
Performance over 1-Year: 71.59%
Dividend Yield: 0.90%
Expense Ratio: 0.19% per year
Data by YCharts
The iShares Russell 2000 ETF aims to provide access to 2000 small-cap stocks, helping diversify stock allocation and achieve long-term portfolio growth. For investors seeking to pick up small-cap stocks this fund should make it to the consideration list.
The indexes created by FTSE Russel, covers mega cap to microcap stocks and are considered benchmarks for investors by many. The Russel Indexes act as performance benchmarks for many products such as tracking funds, derivatives and Exchange Traded Funds. Some of the most popular indexes are Russell 1000®, Russell 2000®, Russell 2500™, Russell 3000® and Russell Top 500 among others.
The iShares Russell 2000 ETF was launched by Blackrock, Inc (NYSE: BLK) in May 2000 and tracks the performance of the Russell 2000 Index. Healthcare stocks constitute 18.05 percent of the holdings, followed by Industrials at 16.42 percent. The financial holdings stand at 14.73 percent, while consumer cyclicals and Technology holdings are at 14.31% and 12.60% respectively.
Some of the most noteworthy holdings are comprised of Caesars Entertainment Inc (0.67%), an American Casino and Hotel Company; Penn National Gaming Inc (0.44%), another prominent casino operator and owner of racetracks; GameStop Corp Class A (0.44%), a video game, consumer electronics and gaming merchandise retailer; Plug power (0.44%) a developer of hydrogen fuel cell systems; AMC Entertainment Holdings Inc Class A(0.35%), a movie theatre chain and Novavax, Inc (0.32%) a leading biotechnology company.
The top 10 holdings constitute 4.08% of the total holdings of 2045, which is effective in diversifying company-specific risk for the investors. Year-to-Date the ETF is up by 18.18% and has a turnover of 20 percent. The expense ratio of the fund stands at 0.19 percent, while the dividend yield is 0.82 percent.
Invesco S&P SmallCap Health Care ETF (NASDAQ: PSCH)
Current Price: $191.06
52-week range: $115.79 – 199.88
Assets Under Management: 514.09M
Performance over 1-Year: 68.82%
Dividend Yield: NA
Expense Ratio: 0.29% per year
Data by YCharts
Invesco Exchange-Traded Fund Trust II – Invesco S&P SmallCap Health Care ETF tracks the S&P SmallCap 600® Capped Health Care Index (Index) and invests at least 90% of its total assets in the securities that comprise the Index. The index consists of stocks in the healthcare sector engaged in healthcare services including biotechnology, pharmaceuticals, medical technology and supplies. The fund was launched in April 2010 and is managed by Invesco.
Healthcare stocks constitute 97.56% of the holdings, while technology (1.02%), Financials (0.96%) and Industrials (0.46%) make up the rest. Some of the prominent holdings of the fund are Omnicell Inc (5.07%), a healthcare technology company, NeoGenomics Inc (4.06%), a cancer diagnostics and pharma service company; Select Medical Holdings Corp (3.66%), an operator of specialty hospitals and outpatient rehabilitation centers, Glaukos Corp (2.85%), an ophthalmic medical technology and pharmaceutical company and Merit Medical Systems Inc (2.51%) manufacturer and marketer of proprietary disposable medical devices to name a few. The top 10 holdings constitute 34.01 % out of the total number of holdings which stand at 75.
The fund has a year-to-date return of 12.06 % and a turnover of 19 percent, its expense ratio stands at 0.29 percent and it currently does not pay a dividend.
Vanguard S&P Small-Cap 600 Value ETF (NYSEArca: VIOV)
Current Price: $186.23
52-week range: $97.93 – 191.52
Assets Under Management: $1.49B
Performance over 1-Year: 86.70%
Dividend Yield: 1.16%
Expense Ratio: 0.15% per year
Data by YCharts
Vanguard S&P Small-Cap 600 Value ETF was launched in September 2010 and is managed by The Vanguard Group Inc. The fund tracks the performance of the S&P SmallCap 600 Value Index and uses an indexing investment approach that involves the replication of the target index by investing in stocks that make up the index in exactly the same proportion as it is held in the index.
This ETF’s heaviest allocation is in Financials (22.90%), followed by Industrials (16.24%), consumer cyclicals (16.05%), Real Estate (11.83%), Technology (7.90%) and Healthcare (5.99%). A look at the individual holdings shows that Macy’s Inc, a departmental store chain accounts for 0.93%, followed by GamesStop Corp Class A (0.91%), a video game, consumer electronics and gaming merchandise retailer; BankUnited Inc (0.78%), an online banking solutions specialist, Resideo Technologies Inc (0.78%), a home security and comfort solutions provider among others.
The top 10 holdings make up for 7.53 percent of the total assets under management. At 477, the number of holdings do an effective job of diversifying company-specific risk for the investors.
The fund has a year-to-date return of 33.98 % and a turnover of 46 percent, its expense ratio stands at 0.15 percent, while the dividend yield is 1.13 percent.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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References
https://www.investopedia.com/investing/small-cap-etfs/
https://www.ftserussell.com/products/indices/russell-us
https://seekingalpha.com/symbol/IWM
https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=Advisor&ticker=PSCH
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