Microcap stocks and exchange traded funds are rarely on the radar screen of the average investor. During times of economic growth, the smallest companies are nimble and able to ramp up quickly to handle demand. At the same time, small companies can downsize when they need to weather an economic storm.

Currently, there are three choices for a microcap ETFs: The PowerShares Zacks Microcap Portfolio (PZI), First Trust Dow Jones Select Microcap (FDM), and the iShares Russell Microcap (IWC). Zoe Van Schyndel, looks at each of these ETFs and finds that they invest in microcap stocks, but in different ways.  One looks at market cap, another at liquidity and a third at risk return.an article, states funds also provide diversification benefits, because the companies composing their portfolios don’t move in step with other market capitalizations.

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.