• Small Dividends Leads the Way: For those concerned about the prospects of small-cap stocks in the U.S., we believe that Small Dividends deserves particular focus. The focus solely on dividend payers and the broad diversification combine to form what we’d categorize as WisdomTree’s most defensive way to maintain small-cap equity exposure. Small Div Growth and Small Profitables would both creep more toward the growth side of the style box compared to Small Dividends.
Conclusion: All Small Cap Indexes Are NOT Created Equal
After 2013, a year where many segments of the U.S. equity markets performed particularly well, we believe that attentiveness to risk mitigation has become more important, especially in small-cap stocks. While we wrote about potential pockets of value within small caps earlier this year, here we emphasize Index methodologies, and those that purposefully avoid the more speculative companies can be beneficial. One may never fully eliminate the risk of investing in small-cap stocks, but we believe that a few simple rules have the potential to make a noticeable difference—especially during periods where markets become a bit choppy.
1Measures of quality refer to three-year average return on equity (ROE) and three-year average return on assets (ROA)
Important Risks Related to this Article
Dividends are not guaranteed, and a company’s future ability to pay dividends may be limited. A company currently paying dividends may cease paying dividends at any time. Investments focusing on certain sectors and/or smaller companies increase their vulnerability to any single economic or regulatory development.