Earlier, we read about the top 3 ETFs in the small-cap category and the top 3 in the mid-cap category. Here, we will have a look at the top three ETFs in the micro-cap category.
Before finding out what the top 3 ETFs in the micro-cap category are, we must first understand what micro-cap is.
What is a micro-cap?
A micro-cap is a publicly listed corporation in the United States with a market capitalization of less than $300 million.
Micro-cap firms have a more significant market cap than nano-cap businesses, but they have a lower market capitalization than any other type of company.
For firms with larger market capitalizations, stock prices are not always higher than those with lower market capitalizations.
Nano and micro-cap corporations are notorious for their fluctuation, and as a result, they are viewed as risky than companies with more significant market capitalization.
Micro-caps are also high-risk because many of them have unproven goods and no firm history, resources, sales, or operations.
They are also susceptible to higher price shocks due to a lack of liquidity and a minuscule shareholder base.
As micro-cap equities have a market capitalization of $50 million to $300 million, investors can expect higher volatility and risk than equities in the S&P 500.
On the other hand, micro-caps tend to do better than their larger counterparts in periods of bullish strength.
The top 3 recommendations in the micro-cap category ETFs
| Rank | ETF |
| 1 | SPDR S&P 600 Small Cap Value ETF |
| 2 | iShares S&P Small-Cap 600 Value ETF |
| 3 | WisdomTree U.S. SmallCap Dividend Fund |
1. SPDR S&P 600 Small Cap Value ETF
SLYV is a small-cap value fund that follows the S&P SmallCap 600 Value Index. It has a lesser tilt than its index and provides good small-cap value exposure.
Its constituents are selected from the S&P SmallCap 600 companies with the best value characteristics, as measured by the following ratios
- book value-to-price ratio
- earnings-to-price ratio
- sales-to-price ratio
The fundamental benchmark’s weight is the respective market capitalization and is rebalanced once a year. The fund uses a sampling technique, which implies this might not possess all of the underlying assets in the same proportions, but it does hold exposure with a similar investment profile.
The MSCI ESG Fund Rating for the SPDR S&P 600 Small Cap Value ETF is BBB, reflecting a score of 5.16 out of 10.
Performance
| Performance [as of 16/03/22] | 1 year | 3 years | 5 years | 10 years |
| SLYV | -4.94% | 12.16% | 10.27% | 10.95% |
| S&P Small Cap 600 Value | -0.98% | 13.00% | 9.91% | 11.96% |
The fund invests entirely in the United States.
SLYV Top 10 holdings
SLYV details
| Brand | SPDR |
| Expense Ratio | 0.15% |
| YTD Return | -3.84% |
| AUM | $4.12B |
| Number of Holdings | 459 |
| Avg. Spread ($) | $0.09 |
| Average Daily $ Volume | $19.87M |
2. iShares S&P Small-Cap 600 Value ETF
IJS invests in potentially undervalued small-cap firms in the United States.
The S&P SmallCap 600 Underlying Index identifies value stocks with the most vital fundamental qualities, Price book value, and price to earnings ratio, and sales-to-price ratio, from the S&P SmallCap 600.
Once a year, in December, the underlying index is rebalanced. The MSCI ESG Fund Rating for the iShares S&P Small-Cap 600 Value ETF is BBB, based on 5.16 out of 10.
Performance
| Performance [as of 16/03/22] | 1 year | 3 years | 5 years | 10 years |
| IJS | -5.09% | 12.01% | 9.30% | 11.51% |
| S&P Small Cap 600 Value | -0.98% | 13.00% | 9.91% | 11.96% |
The fund invests entirely in the United States.
IJS Top 10 holdings
IJS details
| Brand | iShares |
| Expense Ratio | 0.18% |
| YTD Return | -4.02% |
| AUM | $8.71B |
| Number of Holdings | 458 |
| Avg. Spread ($) | $0.07 |
| Average Daily $ Volume | $51.83M |
3. WisdomTree U.S. SmallCap Dividend Fund
As it is a yield-focused fund, DES stands out among the slew of US small-cap ETFs. By overweighting dividend-heavy industries, DES’ strategy provides a greater dividend yield than the market. DES favors the micro-cap end of the small-cap spectrum.
After the 300 largest corporations are excluded, the residual market capitalization of the WisdomTree US Dividend Index the dividend-paying world of businesses in the US stock market is used to determine index components.
Companies that make up the lowest 25% of the residual market capitalization are taken into account. Every year, the Underlying Benchmark is rebalanced.
The fund’s index was previously known as the WisdomTree Small Cap Dividend Index until June 30, 2017.
Performance
| Performance [as of 16/03/22] | 1 year | 3 years | 5 years | 10 years |
| DES | -0.46% | 7.38% | 6.27% | 9.97% |
| WisdomTree U.S. Small Cap Dividend Index | 2.77% | 8.39% | 6.96% | 10.41% |
The fund invests entirely in the United States.
DES top 10 holdings
DES details
| Brand | WisdomTree |
| Expense Ratio | 0.38% |
| YTD Return | -4.05% |
| AUM | $1.85B |
| Number of Holdings | 677 |
| Avg. Spread ($) | $0.03 |
| Average Daily $ Volume | $5.45M |
One should look at these ETFs before investing in the micro-cap category in the USA.
FAQs
What is a micro-cap?
A micro-cap is a publicly listed corporation in the United States with a market capitalization of less than $300 million.
Micro-cap firms have a more significant market cap than nano-cap businesses, but they have a lower market capitalization than any other type of company.
For firms with larger market capitalizations, stock prices are not always higher than those with lower market capitalizations.
What are the 3 best ETFs for micro-cap category investing?
- SPDR S&P 600 Small Cap Value ETF
- iShares S&P Small-Cap 600 Value ETF
- WisdomTree U.S. SmallCap Dividend Fund
Is Micro-cap investing risky?
Micro-caps are also high-risk because many of them have unproven goods and no firm history, resources, sales, or operations.
