Small Cap and Small Size ETFs


This is one of a series of articles discussing smart beta ETFs. Other smart beta articles you can read:



A small cap stock is generally defined as the stock of publicly traded company that has a market capitalization ranging from $300 million to about $2 billion. ETFs that invest in small cap stocks have been around a long time, and most people wouldn't necessarily consider a small cap ETF to be a "smart beta" ETF. But since "size" is perhaps the most well established factor that can lead to a stock outperforming the market, we have included this article about small cap ETFs in our "smart beta" series of articles. But many of the small cap ETFs that exist have been around a long time and are based on plain vanilla indexes that weight their holdings using market capitalization.

There are also a lot of smart beta large and mid cap stock indexes that intentionally select "smaller" size companies from the list of large and mid cap stocks included in the parent universe of stocks. We call these "small size factor" indexes, or small size ETPs.

There are a large number of small cap or small size factor ETPs, as shown in this table:

CategoryCount
Global Equity15
Special Security Types1
US Equity 36
US Fixed Income1
Total53

The number of small cap or small size factor ETFs continues to grow, as shown by this table:

Year of InceptionCount
20001
20051
20072
201010
20112
20123
20131
20141
201520
20166
20174
20202
Total53

Note that there were actually even more ETFs launched then this table shows, as we are only displaying the launch dates of ETFs still active in our database. There were more ETFs that were launched during these years that have since been closed down by their sponsor.

More and more ETFs are being launched that combine small cap investing, or the small size factor, with other investment factors:

Number of Factors UsedCount
113
28
312
413
56
61
Total53

Notable Small Cap ETFs

IJR is one of the biggest and oldest of the small cap ETFs. It tracks the S&P 600 Small Cap Index, one of the oldest small cap indices:


IWM is also one of the biggest and oldest of the small cap ETFs. It tracks the Russell 2000 Index, another one of the oldest small cap indices:


Does small cap investing outperform?

As mentioned above "size" is one of the most well established factors identified during academic research that can lead to a stock outperforming the market. You can also use our list of ETFs that have outperformed SPY to note that historically, small and mid cap stocks have performed well. Most of the best performing ETFs that have been around at least eight years are small and mid cap stock ETFs, or are total market ETFs that by design include small and mid cap stocks. THRK, for example, which tracks the Russell 3000, has performed well, presumably because it includes not just the S&P 500 stocks but also small and mid cap stocks.

The market usually goes in cycles where for periods of time, small cap stocks will outperform large cap stocks, and then for other periods of time large cap stocks will outperform small cap stocks. One way to view these cycles is to look at what we call "ratio stocks", which are simply price charts that show the ratio of one ETF price to another :



One thing we do at StockMarketMBA.com is give each ETF a rating for long term investors. Here are the small cap, or small size factor ETFs that we have given a rating of "editor's choice", our highest rating:

SymbolDescriptionInception DateCategoryActions
IJRiShares Core S&P Small-Cap ETF05/22/2000US Equity Analyze
SLYS&P Smallcap 600 ETF11/08/2005US Equity Analyze
EESWisdomTree SmallCap Earnings Fund ETF02/23/2007US Equity Analyze
VIOOVanguard S&P Small-Cap 600 ETF09/07/2010US Equity Analyze
XSHDInvesco S&P SmallCap High Dividend Low Volatility ETF11/29/2016US Equity Analyze

We acknowledge that many of these ETFs are not necessarily considered by some to be "smart beta" ETFs. Again, we are including these small cap ETFs in our discussion of smart beta ETFs because "size" is probably the most well documented and agreed upon factor that leads to one ETF outperforming another.


All data is a live query from our database. The wording was last updated: 04/22/2020.

2020 © Stock Market MBA, Inc. Terms of use | Privacy policy