Small-Cap ETFs: Are They Leading the Way?
August 29th at 6:00am by Tom Lydon
In general, when an economy and market recovers, it is the small-cap stocks and the exchange traded funds (ETFs) that track them that lead the recovery, but is this the case in the current market uptrend?
Small-cap stocks are those with a market capitalization of less than $1 billion. These companies rely on fewer products, have less available cash and are generally more risky than larger companies. But on the plus side, small-cap companies tend to be more nimble and quick to react as market conditions shift.
Matt Krantz of USA Today says that history this time is proving to be correct: small-cap stocks that are leading the recovery effort. In fact, small caps are up nearly 70% from their March lows, whereas the larger stocks have gained nearly 45%. This can further be evidenced through the performance of the following small-cap ETFs:
- Vanguard Small-Cap Value ETF (VBR): up 21.1% year-to-date
- PowerShares Dynamic Small Cap (PJM): up 8.5% year-to-date
- iShares Russell 2000 (IWM): up 19.5% year-to-date
For more stories on small-cap ETFs, visit our small-cap category.
Kevin Grewal contributed to this article.
