PZI follows the Zacks Micro Cap Index, which identifies micro-cap stocks with the highest potential to outperform passive benchmark of micro-cap indices and other micro-cap strategies.
While ETFs allow investors diversify across the micro-cap space, the underlying micro-cap market faces some liquidity concerns.
“The ETF’s portfolio churn means it loses lots of money to market-impact costs and bid-ask spreads,” Morningstar analyst Samuel Lee warned of PZI.
Some small-cap ETFs include:
- iShares Russell 2000 (NYSEArca: IWM)
- iShares Core S&P Small-Cap ETF(NYSEArca: IJR)
- Vanguard Small Cap ETF (NYSEArca: VB)
For more information on small capitalization funds, visit our small-cap category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own IWM.