Small-caps are also focused on the domestic economy and have less direct exposure to global geopolitical uncertainty and currency risks, as opposed to large-cap companies that have an international footprint, which may be affected by overseas risks and a strengthening U.S. dollar.
FNDA holds over 800 stocks and its sector tilts are highly cyclical, which could work in the ETF’s favor as interest rates climb.
“The fund currently has greater exposure to industrials and consumer cyclicals than the Russell 2000 Index and less exposure to healthcare stocks. Its holdings tend to trade at slightly lower average multiples of forward earnings than the constituents in the Russell 2000 Index. The portfolio also has a modestly larger market-cap orientation than that benchmark,” according to Morningstar.
Following a recent fee cut, FNDA charges 0.25% per year, making it one of the least expensive smart beta small-cap ETFs on the market.