Small-cap ETFs are the exchange-traded funds that invest in the stocks of companies with a market capitalization between $250 million and $3 billion. The portfolio is diversified with small-cap companies and stocks belonging to different sectors and separate investment goals like value and growth.
Small-cap ETFs offer a much higher growth potential than their large-cap counterparts as the small-cap companies have a lot of room to grow. They undergo exponential gains compared to the larger companies; however, the risks are also equally elevated.Error requesting data: cURL error 28: Operation timed out after 5000 milliseconds with 0 bytes received
Factors to Consider Before Investing in Small-Cap ETFs
Small-cap ETFs do offer higher flexibility and diversification. However, due to high volatility, they are also subject to elevated risks. The performance of small-cap companies and, thus, the small-cap ETFs swings largely from year to year and may not be suitable for risk-averse investors.
Therefore, before investing in small-cap ETFs, investors must be considerate of the volatility and risk of the portfolio. They must remain aware of the liquidity associated with the ETFs, in addition to the expense ratios. The most suitable small-cap ETFs should have low expense ratios, high liquidity, and a lot of diversification.
Which Small-Cap ETFs Should I Buy?
Among the wide variety of small-cap ETFs, we have aggregated a list of the top small-cap ETFs for you to choose from. It is important to consider that for profitable investments, the assets under management should be greater than $150 million, and the ETF must have had positive returns in the past couple of years.
Additionally, investors should also consider the expense ratio of the small-cap ETFs they decide to invest in, in addition to the sector and investment goal they would be willing to get exposed to. The best small-cap ETFs vary for investors investing in international companies, domestic companies, different sectors, and for those looking for value or growth.
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