Small-Cap Equity

Small-cap equity funds and ETFs are funds that own stocks on the... Small-cap equity funds and ETFs are funds that own stocks on the smaller end in terms of market capitalization. They invest most of their assets in companies with market caps of $300 million to $3 billion. These funds may be geographically diversified, can be actively managed or indexed and can also invest in a wide range of sectors. Depending on the fund mandate, these funds may invest in a variety of strategies. For instance, they may prioritize value over growth, or vice versa. Some investors gravitate to small caps because of the potential for higher capital appreciation. Many mid cap
or large-cap stocks were once small caps, and saw their market value rise alongside soaring revenues, profits, and valuations. The small cap segment includes many companies that are in their infancy, and developing innovative services or products. Of course, with higher potential returns comes higher risk. As a general rule, small caps are riskier investments than large caps and tend to have lower credit ratings. They also don’t tend to have the same level of profitability, especially if they are burning through cash in hopes of higher growth. Small-cap equity funds and ETFs may be appropriate for more aggressive investors who seek returns that are higher than the market average. Among these funds, those with more diversified portfolios are usually a safer bet than those which concentrate their holdings in fewer stocks. Last Updated: 01/27/2025 View more View less

Small-cap equity funds and ETFs are funds that own stocks on the smaller end in terms of market capitalization. They invest most of their assets in companies with market caps of $300 million... Small-cap equity funds and ETFs are funds that own stocks on the smaller end in terms of market capitalization. They invest most of their assets in companies with market caps of $300 million to $3 billion. These funds may be geographically diversified, can be actively managed or indexed and can also invest in a wide range of sectors. Depending on the fund mandate, these funds may invest in a variety of strategies. For instance, they may prioritize value over growth, or vice versa. Some investors gravitate to small caps because of the potential for higher capital appreciation. Many mid cap
or large-cap stocks were once small caps, and saw their market value rise alongside soaring revenues, profits, and valuations. The small cap segment includes many companies that are in their infancy, and developing innovative services or products. Of course, with higher potential returns comes higher risk. As a general rule, small caps are riskier investments than large caps and tend to have lower credit ratings. They also don’t tend to have the same level of profitability, especially if they are burning through cash in hopes of higher growth. Small-cap equity funds and ETFs may be appropriate for more aggressive investors who seek returns that are higher than the market average. Among these funds, those with more diversified portfolios are usually a safer bet than those which concentrate their holdings in fewer stocks. Last Updated: 01/27/2025 View more View less