Up almost 170% the past year, it’s easy to see why the Invesco S&P SmallCap 600 Revenue ETF (RWJ) exemplifies the small cap rally, but this particular fund also focuses on those companies with strong revenue generation abilities.
RWJ seeks to track the investment results of the S&P SmallCap 600 Revenue-Weighted Index. The fund will invest at least 90% of its total assets in the securities that comprise the index.
The index is designed to measure the performance of positive revenue-producing constituent securities of the S&P Small Cap 600. The Parent index is comprised of common stocks of approximately 600 small-capitalization companies that generally represent the small cap universe of the U.S. equity market.
“This ETF offers exposure to small cap U.S. stocks, an asset class that is included in most long-term portfolios and can be useful for tactical traders looking to implement a tilt towards riskier securities,” ETF Database writes. “RWJ is one of dozens of options for small cap exposure through ETFs, distinguishing itself from the alternatives though the unique weighting methodology employed.”
“RWJ’s methodology may be appealing for investors who see value in a strategy that shifts exposure towards companies with low price-to-sales multiples, and may also be appealing for those looking to utilize alternatives to market cap-weighting to avoid the strategy’s tendency to skew towards overvalued stocks,” the analysis said further.
Going Small for Big Dividends
Large, high-flying tech stocks have been the go-to choice in the last decade’s bull run, but investors could be missing out with small cap exposure. These smaller companies are also be a reliable source of income.
“The most popular stocks on Wall Street have long been Big Tech darlings such as Amazon.com and Apple,” a U.S. News report published in Yahoo! Finance explained. “But when you look at the stock market right now, it’s hard to have as much confidence in these giants as they have started to underperform the rest of Wall Street after a big run in 2020. Instead of chasing the same old giants, many investors have begun to look at small-cap stocks as an alternative.”
“These more modest companies — with a market capitalization between $300 million and $2 billion — obviously come with more risk since they don’t have the same scale or deep pockets,” the article said further. “That said, by focusing on small-cap dividend stocks, investors can tap into a reliable stream of income as well as potential upside in share prices.”
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