New year on the mind? With the holiday season likely calming market news and narratives in a few weeks, now is the time to act for those refreshing portfolios. 2025 offers plenty of positive economic trends, but with valuations still very high, finding a way to limit that risk matters. One option to do so may be leaning into small-cap offerings. Small-caps can help get that extra bit of upside outside of a large-cap, tech-heavy overall market.
See more: This ETF Duo Is Poised to Leap Forward in 2025
Small-caps offer plenty of potential to grow, but identifying the right opportunities therein poses the real challenge. Not all small firms will meet their potential valuation targets or grow in a manner that best serves a portfolio. Screening small-cap firms, then, stands out as one of the most valuable services a strategy can offer in approaching the space.
With small-caps offering particular upside as rates are poised to drop one more time this year, finding the right fund counts. When rates drop, small-cap firms can borrow to make bigger moves. In debt-heavy categories like tech or biotech, that can have a significant impact. Indeed, cheaper borrowing can also help boost M&A activity, a key avenue for healthy small-cap performance.
The Avantis U.S. Small Cap Value ETF (AVUV) offers a value view into small-caps that can take those positives one step forward. Screening for value could find firms best-positioned for post-rate-cut reevaluation by the market. Charging just 25 basis points, AVUV actively invests in the space, screening for fundamentals like cash flow, revenue, and shares outstanding. The active small cap-fund looks to offer indexing benefits with active adaptability.
Together, that approach has helped AVUV return 11.2% over one month, per Avantis Investors data. That has outperformed the benchmark’s 9.65% return. Together, those factors speak to AVUV as an option to add on to a core allocation in the new year.
For more news, information, and strategy, visit the Core Strategies Channel.
