Beyond IWM: Five Intriguing Small Cap ETFs
Tuesday, June 15th, 2010Michael Johnston submits:
Although most U.S. investors build their portfolios around a core of large cap domestic equities, small-cap firms, which generally have a market capitalization’s under $2 billion, are a vital component as well. Because small cap stocks tend to have smaller customer bases, shorter operating histories, and less cash on hand, they are often more volatile than their large cap counterparts. But because they possess greater growth potential, small caps also carry potential for greater returns.
Many investors elect to complement large and mid cap equity positions in their portfolio with a small cap ETF that offers exposure to a diversified basket of stocks. The most popular ETF in the Small Cap Blend ETFdb Category is the iShares Russell 2000 ETF (IWM), a fund that is comprised of 2,000 of the smallest companies in the Russell 3000 Index. IWM’s broad-based exposure–both in terms of number of securities and sector weightings–has made it the default option for investors seeking to add small caps to their portfolio. But IWM certainly isn’t the only option among small cap ETFs;below we profile five unique funds that may be worth a closer look:
