May 23, 2008 at 6:00 am by Tom Lydon
Lately, mid-cap exchange traded funds (ETFs) have surged on ahead of all the other caps. Bringing up the rear are the microcaps.
Five years ago, that wasn’t the case and microcaps, those companies with market capitalizations between $55 million and $500 million, were soaring to new heights. But Murray Coleman for Index Universe says that with the category in a slump, even an "adventurous contrarian" considering a microcap fund may find many choices among the latest ETFs.
iShares Russell MicroCap (IWC) has the broadest of the portfolios, offering 1,300+ stocks with $277.3 million in assets. It’s down 9.4% year-to-date.
PowerShares Zack’s Micro Portfolio (PZI) has $96.2 million in assets, and the underlying index is monitored weekly. It uses a modified equal weighting system and ranks companies based on relative value and momentum characteristics. It’s down 10% year-to-date.
First Trust Dow Jones Select Micro (FDM) has $15.8 million in assets and follows an index by Dow Jones. Technical and fundamental factors are considered, such as size, liquidity, profit margins, earnings momentum, and historical returns. It’s down 4.9% year-to-date.
Since they’re so volatile, why mess with microcaps? Coleman points out that over longer periods, this category has shown itself to be a higher flyer than regular small-caps. This can make them compelling for investors with iron stomachs.
Subscribe to Our RSS Feed
