Small- and micro-cap exchange traded funds (ETFs) have a lot of appeal with investors. After all, they’re viewed as having more growth potential than their better-established but slower-growing large-cap counterparts.

But are micro-caps an endangered species as they get too big for “micro” stature? After all, as of Sept. 30, the Russell MicroCap Index had an average market capitalization of $268 million, and its largest component was $983 million, reports Heather Bell for Index Universe. (The benefits of micro-caps).

Micro-cap companies are the smallest ones – often so small that you may not have heard of them. Each index provider has its own definition of what constitutes a micro-cap. For example, Standard & Poor’s defines small cap as companies with a market cap of $300 million to $1.5 billion. Dow Jones looks at the largest 5,000 stocks and numbers 751 through 2,500 are put in the Dow Jones U.S. Small-Cap Total Stock Market Index and numbers 2,501 through 5,000 are placed in the Dow Jones U.S. Micro-Cap Total Stock Market Index.

Micro-caps are a bit under-represented in the ETF space, with just four funds in all:

  • iShares Russell MicroCap Index (NYSEArca: IWC): up 19.2%year-to-date

  • PowerShares ZACK MicroCap Portfolio (NYSEArca:PZI): up 7.5% year-to-date

  • First Trust Dow Jones Select MicroCap Index (NYSEArca: FDM): up 14.5% year-to-date

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