Small-Cap ETFs Better Than Small-Cap Funds | ETF Trends

For the past five years, small-cap stocks have outperformed large-cap stocks by a huge factor. No doubt, investors have chased this trend. In an effort to get a handle on the growing portfolios (and keep the money at the same time), actively managed funds have instituted short-term redemption fees and closed many to new investors.

Today, those looking to increase exposure to this asset class are better served using small-cap ETFs, such as iShares Russell 2000 Index (IWM).

As the WSJ points out, "Small-cap stocks, usually defined as having a market capitalization of less than $1.5 billion, have been rallying for years and have outperformed the broad market.

The Russell 2000 small-stock index is up 11.6% for the year to date, and the S&P SmallCap 600 is up 10.5%, both drubbing the Dow Jones Industrial Average’s 3.9% gain and the S&P 500-stock index’s 3.3% rise."


The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.