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For the last few years, small-cap ETFs have outperformed large-cap ETFs worldwide. Small-caps tend to do better when an economy is expanding and have stronger earnings growth.
Previously, most investors looked to large-cap international ETFs to diversify their portfolios with international investments. However, the increase in globalization has caused too much similarity among international large-caps. The idea behind investing in international small-caps for better diversification is that they will vary greatly from one another by investing in local economies.
Small-cap ETFs provide an opportunity for investors, as it is tougher to do research of smaller companies overseas.
For investors interested in small-cap ETFs, a few to consider:
- WisdomTree International SmallCap Dividend Fund (DLS): The WisdomTree International SmallCap Dividend Fund seeks to provide investment results that closely correspond to the price and yield performance of the WisdomTree International SmallCap Dividend Index.
- iShares S&P SmallCap 600 Index Fund (IJR): The iShares S&P SmallCap 600 Index Fund seeks to provide investment results generally equivalent to U.S. small-cap stocks, as represented by the Standard & Poor's SmallCap 600 Index.
- SPDR Russell/Nomura Small Cap Japan ETF (JSC): The SPDR Russell/Nomura Small Cap Japan ETF seeks to closely match the returns and characteristics of the total return performance of an equity index based upon the Russell/Nomura Japan Small Cap Index, a Japanese small cap composite market.
- Powershares Dynamic Small Cap Growth Portfolio ETF (PWT): The PowerShares Dynamic Small Cap Growth Portfolio Fund seeks to replicate the Dynamic Small Cap Growth Intellidex Index, which is designed to provide capital appreciation while maintaining consistent stylistically accurate exposure. The Style Intellidexes apply a rigorous ten factor style isolation process to objectively segregate companies into their appropriate investment style and size universe.
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