A Small Lesson in Large-Cap ETFs | ETF Trends

SPDR S&P 500 (NYSEArca: SPY) is the largest exchange traded fund (ETF) in the world. But if you’re only looking at funds that give exposure to large-caps, you may not be maximizing your potential.

In this market climate , investing solely in  the biggest, most popular index funds might result in disappointing returns and/or missed opportunities.

Don’t get us wrong: the S&P 500 is the benchmark index, used by millions as a gauge of the health of the markets. The lesson here, though, is not to put all your eggs in one basket. Dan Caplinger for The Motley Fool recently made a similar point. [The Case For Large Cap ETFs.]

If you’re only looking at the largest companies when investing in ETFs, you may be missing out. At any given time, a number of asset classes and sectors come in and go out of favor.

These days, small- and mid-caps are living large. Just compare the S&P 500, which is up 11.8% year-to-date, to other funds such as PowerShares Dynamic Small Cap (NYSEArca: PJM), up 22%; iShares Russell Microcap (NYSEArca: IWC), up 25.9%; and Schwab U.S. Small-Cap (NYSEArca: SCHA).