The recent sell-offs may have investors wondering where they should turn. One place to look at is small cap growth with ETFs like the SPDR S&P 600 Small Cap Growth ETF (SLYG).
SLYG seeks to provide investment results that correspond generally to the total return performance of the S&P SmallCap 600 Growth Index. The fund generally invests substantially all, but at least 80%, of its total assets in the securities comprising the index.
The index measures the performance of the small-capitalization growth segment of the U.S. equity market. It may purchase a subset of the securities in the index in an effort to hold a portfolio of securities with generally the same risk and return characteristics of the index.
“This particular ETF, since it focuses on growth securities, has certain biases in its portfolio holdings and may not offer as much of a cross section as funds such as IWM and be more volatile as well,” an ETF Database write-up noted. “However, SLYG does a solid job of dividing up assets as the fund holds close to 360 securities in total and doesn’t give any one security more than 1.8% of the total assets.”
SLYG is up about 8% thus far in 2021. In the past 12 months, the fund has risen 37%.
Fight the (Potential?) Bubble with Small Cap ETFs
With investors fretting over rising Treasury yields and potential inflation, large- and mid-cap growth equities have been selling off as of late. This gives small cap equities a chance to continue shining as investors look to stave off a potential bubble via growth opportunities.
“With the stock market’s unprecedented rally over the past year, many large- and mid-cap growth stocks have become highly overvalued by traditional measures,” a Stock News article said. “Hence, there are rising fears among investors of a potential market bubble, and experts believe that these large- and mid-cap growth stocks will soon experience significant price corrections. So, given the market’s status, investing in small-cap stocks that have solid growth potential could be a wise decision.”
“It’s true that small-cap stocks typically carry higher risk profiles than their mid- or large-cap counterparts, but the higher risk is generally compensated for by the potential ability of such stocks to deliver significantly higher returns,” the article added.
For more news and information, visit the Smart Beta Channel.