“Small caps have historically provided a slight return premium over large-cap stocks,” he added. “A substantial stake in micro-caps can help juice returns for this ETF if the market rallies and over the very long term.”
The chart below shows the price ratio of the Russell 2000 fund relative to SPDR S&P 500 ETF (NYSEArca: SPY) showing the outperformance of small-cap stocks so far in 2012.
Full disclosure: Tom Lydon’s clients own SPY.