5 Best Small Cap ETFs: 2022 Picks! | Dollar Bureau

5 Best Small-Cap ETFs: Check These Out! đź‘€

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Small caps are often overlooked as a great investment option. They offer higher reward potential than large caps, but also tend to have more risks.

That’s why investing in them via an exchange-traded fund is attractive to many investors.
While many are looking at the best tech ETFs and the best Chinese ETFs, small caps are often forgotten about.

In this post, I’ll be covering the 5 best small-cap ETFs that you can consider looking into.

5 Best Small-Cap ETF

  1. Vanguard Small-Cap ETF
  2. iShares Morningstar Small Cap ETF
  3. First Trust Small Cap Growth AlphaDEX Fund
  4. Invesco S&P SmallCap Value with Momentum ETF
  5. Victory Shares US Small Cap High Dividend Volatility Weighted ETF

 

ETF Ticker What it tracks Expense Ratio
Vanguard Small-Cap ETF VB CRSP US Small Cap Index 0.05%
iShares Morningstar Small Cap ETF ISCB Morningstar US Small Cap Extended IndexSM 0.04%
First Trust Small Cap Growth AlphaDEX Fund  FYC NASDAQ US 700 Small Cap Index TM 0.70%
Invesco S&P SmallCap Value With Momentum ETF XSVM S&P SmallCap 600 High Momentum 0.39%
Victory Shares US Small Cap High Dividend Volatility Weighted ETF CSB Nasdaq Victory US Small Cap High Dividend 100 Volatility Weighted Index 0.35%

1. Vanguard Small-Cap ETF

The Vanguard Group was launched in 1975 in the US state of Pennsylvania. It’s one of the largest Equity Index managers in the world.

VB seeks to track the investment results of the CRSP US Small Cap Index which estimates the performance of small-cap stocks. It offers the best way to correspond to the performance of a broad variety of small companies in the index.

The fund adopts a passively managed and full-replication strategy. Thus it holds every stock in a similar proportion as the base index.

The fund’s current NAV is $195.05 to deliver a market capitalisation of $131.5 billion. Because fees can impact your investment, the fund has maintained a low expense ratio of 0.05% p.a.

Dividend distributions for the ETF are scheduled every quarter. The current distribution yield is 2.41% over a 12-month trailing period.

VB Performance Chart

VB performance

Period 1 Year 3 Years 5 Years 10 Years
VB Performance -11.53% 8.99% 9.25% 11.27%
CRSP US Small Cap Index Performance -11.52% 8.97% 9.24% 11.25%

Source

 

From the chart, the fund has shown an impressive performance since the market crash of March 2020 occasioned by the COVID-19 pandemic. As well, it has performed similarly to the base index over the last 10 years.

Portfolio Composition

The fund has invested in a wide range of industries as shown in the table below.

Allocation Weightage
Basic Materials 4.70%
Consumer Discretionary 14.70%
Consumer Staples 3.10%
Energy 5.70%
Financials 15.10%
Healthcare 10.90%
Industrials 18.90%
Other 0.00%
Real Estate 9.40%
Technology 12.30%
Telecommunications 1.50%
Utilities 3.70%

As you can see, there’s more weight in the Industrials, Consumer Discretionary, Technology, Financials, and Health, which are the main drivers of the economy.

Top 10 Holdings

The ETF have stakes in the following companies.

Company Weightage
Molina Healthcare 0.37%
Quanta Services 0.35%
Marathon Oil Corporation 0.34%
Constellation Energy Corporation 0.34%
Entegris 0.33%
Targa Resources Corp 0.32%
Bio-Techne Corp 0.32%
Alcoa Corp AA 0.32%
Brown & Brown 0.31%
Atmos Energy Corp 0.30%

Geographic Breakdown

Most investments are found in the US as shown in the table below;

Region Weightage
Asia Developed 0.1%
Asia Emerging 0.2%
Latin America 0.2%
United Kingdom 0.1%
United States 99.4%

2. iShares Morningstar Small Cap ETF (ISCB)

The ETF seeks to track the performance of the Morningstar US Small Cap Extended IndexSM which comprises small-cap US equities.

The ETF invests not less than 80% of its assets in the various securities in the base index. Therefore, the investments are almost identical to the securities in the base index. The underlying index estimates the performance of stocks issued by small-cap companies.

The fund was launched on 28th June 2004 and currently has 1,759 holdings. The NAV is $49.914 to deliver a market capitalisation of $205.70 million.

The fund has a quarterly dividend distribution policy and recorded a 1.34% trailing return within the last 12 months.

ISCB Performance 

The ISCB has registered a remarkable performance since its inception as shown in the chart below. However, there was a small dip in 2020 occasioned by the COVID-19 pandemic.

ISCB performance

There is not much difference between the NAV returns and the benchmark since inception.

Period 1 Year 3 Years 5 Years 10 Years
NAV -11.53% 8.99% 9.25% 11.27%
Benchmark -11.52% 8.97% 9.24% 11.25%

Source:

 

Top 10 Holdings

Here are the top 10 stocks from various companies and their weightings.

Stock Weightage
EQT Corp 0.35%
Antero Resources Corp 0.29%
Webster Financial Corp 0.26%
BJ’s Wholesale Club Holdings 0.26%
American Campus Communities 0.26%
First Citizens BancShares Class A 0.25%
Chesapeake Energy Corp Ordinary Shares 0.25%
Royal Gold 0.24%
Wyndham Hotels & Resorts Ordinary Shares 0.24%
United States Steel Corp 0.24%

Sector breakdown

The ISCB ETF has invested more in financial, industrials, IT, healthcare, and consumer discretionary sectors.

Type Weightage
Financials 16.16%
Industrials 15.26%
Information Technology 13.98%
Healthcare 13.77%
Consumer Discretionary 11.25%
Real Estate 8.33%
Energy 6.09%
Materials 5.16%
Consumer Staples 4.15%
Communication 2.86%
Utilities 2.84%
Cash and/or Derivatives 0.16%

Geographical spread

The fund is domiciled in the US, and it also takes the bulk of the geographical allocation.

Region Weightage
Asia Developed 0.10%
Asia Emerging 0.10%
Canada 0.10%
Europe Ex Euro 0.10%
Eurozone 0.10%
Latin America 0.50%
United Kingdom 0.20%
United States 98.7%

3. First Trust Small Cap Growth AlphaDEX Fund (FYC)

The fund seeks to track the performance of the Nasdaq AlphaDEX small-cap growth index by investing at the very least 90% of its assets in securities that constitute the index.

Further, the fund’s objective is to select growth and value securities from the NASDAQ US 700 Small Cap Index TM through the AlphaDEX selection methodology.

The fund’s current NAV stands at $62.050 to deliver a market capitalisation of $0.34962 billion. However, it has an expense ratio of 0.70% which is higher than most ETFs.

The fund pays dividends every quarter and currently has a 0.77% distribution yield over a trailing 12-month period.

FYC Performance

The ETF has shown a steady performance over the last 10 years and the growth was outstanding in 2021.

FYC ETF performance

The 10-year returns for the base index are not available since the ETF changed the underlying index it tracked.

Period 1 Year 3 Years 5 Years 10 Years
NAV Performance -18.33% 9.46% 10.51% 11.27%
Nasdaq AlphaDEX Small Cap Growth Index. -18.13% 10.34% 11.37%

Source:

 

Top 10 Holdings

Here are the top 10 companies the fund has staked in.

Company Weightage
Comstock Resources 0.90%
Arch Resources Class A 0.85%
Patterson-UTI Energy 0.78%
MGP Ingredients 0.76%
Vector Group 0.75%
Lantheus Holdings 0.74%
Weatherford International Ordinary Shares – New 0.73%
Mueller Industries 0.72%
Hostess Brands Class A 0.72%
InvenTrust Properties Corp 0.71%

Sector Allocation

The sector allocation is widespread and includes financials, healthcare technology, and industrials. Worth noting that these are some of the top sectors that fuel growth in any economy,

Sector Weightage
Basic Materials 1.48%
Communication Services 6.45%
Consumer Cyclical 10.21%
Consumer Defensive 5.37%
Energy 8.12%
Financial Services 10.86%
Healthcare 15.52%
Industrials 14.49%
Real Estate 10.79%
Technology 13.77%
Utilities 2.96%

Geographical Spread

Most investments are found in the US, with an extremely small amount in the Eurozone and Latin America.

Region Weightage
Eurozone 0.30%
Latin America 0.80%
United States 98.80%

4. Invesco S&P Small Cap Value With Momentum ETF (XSVM)

The ETF is based on the S&P 600 High Momentum Value Index. It invests at least 90% of its assets in the stocks that comprise the index.

The fund has 120 securities obtained from the S&P 600 High Momentum Value Index as they follow a methodology where the securities are weighted depending on their scores.

The fund was started on 3/03/2005 and currently has a NAV of $50.01 to deliver a market capitalisation of $0.72868 billion.

The fund has maintained a lower expense ratio of 0.39% per annum. Dividends are paid quarterly for this ETF and the present yield stands at 1.49% over a trailing 12-month period.

XSVM Performance

XSVM ETF performance

The fund’s performance in 2021 has been impressive recording an all-time high in the NAV.

Moreover, the ETF has kept pace with the benchmark in the past year.

Notably, there are no returns for years 3, 5 and 10 because the ETF changed the index it was tracking. In this case, it changed the base index to S&P SmallCap 600 High Momentum Value Index.

Period 1 Year 3 Years 5 Years 10 Years
NAV Performance 3.49% 20.16% 13.08% 13.88%
S&P SmallCap 600 High Momentum Value Index 3.87%

Source:

 

Top 10 Holdings

Here are the top 10 holdings;

Name Weightage
Olympic Steel 3.29%
PBF Energy Class A 2.66%
Andersons 2.16%
Rayonier Advanced Materials 1.75%
Fresh Del Monte Produce 1.63%
Titan International 1.61%
ODP Corporation 1.58%
TimkenSteel Corp 1.58%
Mercer International 1.56%
SunCoke Energy 1.44%

Sector Allocation

The ETF has invested heavily in the finance sector while others such as industrials, retail, and non-energy minerals follow.

Sector Weightage
Finance 37.10%
Process Industries 8.64%
Retail Trade 8.28%
Non-Energy Minerals 8.15%
Distribution Services 6.01%
Energy Minerals 4.79%
Producer Manufacturing 4.61%
Consumer Non-Durables 3.78%
Consumer Services 3.55%
Consumer Durables 2.75%

Geographical allocation

The fund’s geographical spread is 100% in the US.

5. Victory Shares US Small Cap High Dividend Volatility Weighted ETF (CSB)

The fund’s objective is to track the investment results of the Nasdaq Victory US Small Cap High Dividend 100 Volatility Weighted Index. It does so to achieve its investment goal by staking at least 80% of its assets in the stocks comprising the base index.

The ETF was established on 7th July 2015 and currently has a NAV of $54.20 to deliver a fund size of $0.27219 billion.

Investors can receive their dividends every quarter. For the last 12 months, the fund has registered a dividend distribution of 2.89%.

Investing in CSB offers you a chance to enjoy benefits from high-yielding small-capitalisation stocks.

CSB Performance 

CSB ETF performance

From the performance chart, the fund has grown since 2020 after the market crash caused by the COVID-19 pandemic.

The fund’s NAV has registered positive returns for the few years it’s been around.

Period 1 Year 3 Years 5 Years 10 Years
NAV Performance -2.623% 10.875% 9.510%

The benchmark is not included as they were tracking the MSCI USA Small Cap Index previously and have since changed to the Nasdaq Victory US Small Cap High Dividend 100 Volatility Weighted Index.

Source

 

Top 10 Holdings

Here are the fund’s top 10 holdings.

Company Weightage
MGE Energy 1.81%
Safety Insurance Group 1.75%
CSG Systems International 1.68%
SpartanNash 1.63%
Weis Markets 1.62%
Universal Corp 1.61%
SJW Group 1.46%
Brady Corp Class A 1.42%
Unitil Corp 1.41%
Northwest Natural Holding 1.39%

Sector allocation

The top sectors the fund has invested in include; Financials, industrials, consumer discretionary, and consumer staples.

Sector Weightage
Communication Services 2.07%
Consumer Discretionary 15.74%
Consumer Staples 12.15%
Energy 2.63%
Financials 23.19%
Health Care 3.18%
Industrials 19.84%
Information Technology 6.90%
Materials 5.52%
Others 0.01%
Real Estate 0.91%
Utilities 7.42%
Cash & Cash Equivalents 0.44%

Geographical allocation

The fund’s geographical allocation is 100% in the US.

Conclusion

In conclusion, small caps are a great way to invest in companies that aren’t too risky but still offer a decent return.

They’re often overlooked because investors are focused on the blue chips and the next trendy thing.

While many assume that they’re only suitable for very experienced traders, that couldn’t be further from the truth. With a bit of knowledge and patience, you can easily turn these into profitable investments.

However, take note that because these are small caps, they carry their own set of risks that you should know and understand more about.

Thus, it’s best to learn more about small-cap investing before actually diving into them.

Interested in these ETFs?

Our preferred broker is moomoo due to their low trading fees.

You can also check out our guide on the best trading platforms in Singapore.

If you’re not sure about what you’re doing and would prefer someone to help you instead, it’s best to get a financial advisor to help you invest instead.

Disclaimer: Each article written obtained its information from reliable sources and should be purely used for informational purposes only. The information provided by Singapore Financial Planners and its affiliated parties is not meant to be construed as financial advice. Singapore Financial Planners shall not be held liable for any inaccuracies, mistakes, omissions, and losses incurred should you act upon any information listed on this website. We recommend readers to seek financial planning advice from qualified financial advisors. 

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