Micro-Cap ETFs: Higher Risk, But Higher Reward? | Page 2 of 2 | ETF Trends

  • First Trust Dow Jones Micro-cap ETF (NYSEArca: FDM)

Of the three, IWC is the most popular and is composed of more than 1,300 stocks, which effectively eliminates any company-specific risk. Year to date, IWC is up 5% while the SPDR S&P 500 ETF (NYSEArca: SPY) is down 2%. In 2009, IWC gained 22% to SPY’s 23%. In 2008, IWC lost 40 % to SPY’s 38%.

As you can tell, micro-cap stocks seem to follow the market closely. Although that will not always hold true, it should encourage investors who do not have a strong stomach for huge losses to use ETFs as an entry point into this potentially lucrative sector.

For more information on micro-cap stocks, visit our micro-cap category.

Sumin Kim contributed to this article.