Micro-Cap ETFs
Micro-cap stocks, although risky, can have a place in portfolios. The obvious two methods to investing in these type of stocks are through ETFs and individual equities.
The big advantage with micro-cap ETFs is that your risk is spread out across multiple companies, so your investment doesn’t go down with the ship. Another advantage is the time savings – providers do the research and build the funds, you simply compare and buy the one that’s best for your clients.
A word of caution, however: micro-cap ETFs have relatively high turnover, since component companies often grow too big to be considered micro-caps or they do the reverse and disappear altogether.
The three available micro-cap ETFs are:
iShares Russell Microcap Index Fund (NYSEArca: IWC). IWC tries to reflect the Russell Microcap Index, which is made up of the smallest 1,000 stocks in the Russell 2000 small-cap index, along with the next 1,000 stocks under.
First Trust Dow Jones Select MicroCap Index Fund (NYSEArca: FDM). FDM tries to reflect the Dow Jones select MicroCap Index, which includes liquid stocks and stocks with strong fundamentals trading on the NYSE and Nasdaq stock market.
PowerShares Zacks Micro Cap Portfolio (NYSEArca: PZI). PZI tries to reflect the Zacks Micro Cap Portfolio, which has a “proprietary composite scoring system based on relative value and momentum.”
To research any of these ETFs further, click the ticker symbol to be taken to the ETF Resume, where you can view holdings, the prospectus and long-term performance. To sort and compare all three ETFs, stop by the ETF Analyzer.
As a pro member, you also have the ability to set up watchlists and trading alerts for these and other ETFs!