Small-cap ETFs have emerged as a powerful investment tool, offering investors the opportunity to tap into the potential for significant growth and innovation inherent in smaller companies. These funds provide broad exposure to a diverse range of small-cap stocks, often characterized by their agility, adaptability, and capacity for rapid expansion. By pooling investments across multiple companies, small-cap ETFs mitigate the risks associated with individual stock selection while still delivering the benefits of active management and cost efficiency. As economies evolve and new industries emerge, small-cap ETFs serve as a dynamic gateway for investors seeking to capture the upside of early-stage growth and emerging trends, making them an essential component of a well-diversified portfolio.
iShares S&P Small-Cap 600 Value ETF IJS
The iShares S&P Small-Cap 600 Value ETF (IJS) is an exchange-traded fund designed to track the performance of the S&P SmallCap 600 Value Index, which consists of small-capitalization U.S. equities that exhibit value characteristics. Launched in July 2000, the ETF aims to provide exposure to companies that are considered undervalued based on metrics such as price-to-book and price-to-earnings ratios.
IJS typically invests at least 80% of its assets in the component securities of the index and may also use futures, options, and swap contracts to achieve its investment objective. The fund is managed by BlackRock and offers a diversified portfolio with holdings across various sectors, including financials, industrials, and consumer discretionary.
With an expense ratio that is competitive within its category, IJS provides investors with a cost-effective way to gain exposure to small-cap value stocks, which are often seen as having higher growth potential compared to larger-cap stocks. However, it is important to note that small-cap value ETFs can be more volatile and may carry higher risks due to their exposure to cyclical sectors.
Dimensional US Small Cap Value ETF DFSV
The Dimensional US Small Cap Value ETF (DFSV) is an actively managed exchange-traded fund designed to provide exposure to small-cap value stocks in the United States. Launched in 2022, DFSV aims to achieve long-term capital appreciation by investing in a diverse portfolio of small-cap companies that exhibit value characteristics.
The fund uses a market capitalization-weighted approach, where companies with higher market capitalizations represent a larger proportion of the portfolio. It targets stocks that are considered undervalued based on metrics such as price-to-book and price-to-earnings ratios. DFSV has an expense ratio of 0.31%, which is relatively competitive within its category.
One of the key features of DFSV is its focus on factor investing, leveraging Dimensional Fund Advisors’ expertise in capturing risk factors like size, value, and profitability. This targeted approach aims to provide more efficient exposure to small-cap value stocks compared to traditional passive funds.
As of June 24, 2024, the fund’s top holdings include companies such as Amkor Technology, PVH Corp, and Commercial Metals, with each holding representing less than 1% of the total portfolio. DFSV’s active management strategy allows it to dynamically adjust its holdings to better align with market conditions and value opportunities.
Avantis US Small Cap Equity ETF AVSC
The Avantis US Small Cap Equity ETF (AVSC) is an actively managed exchange-traded fund designed to seek long-term capital appreciation by investing in a diverse group of U.S. small-cap companies. The fund aims to combine the benefits of indexing, such as diversification, low turnover, transparency, and tax efficiency, while also adding value through active management.
AVSC considers valuation, profitability, and levels of investment when selecting and weighting securities, targeting a mix of growth and value stocks. It does not seek to replicate the performance of a specified index but rather makes investment decisions based on current market data and analysis. The fund has a gross and net expense ratio of 0.25%, positioning it competitively in terms of cost.
As of February 7, 2025, AVSC had total assets of approximately $1.5 billion and a market price of $55.13. The fund’s top holdings include companies such as Abercrombie & Fitch Co., Avidity Biosciences Inc., and Skywest Inc., with each holding representing less than 1% of the total portfolio.
Overall, AVSC offers investors exposure to the potential growth of small-cap companies while managing risks through active management and a diversified portfolio.
Avantis US Small Cap Value ETF AVUV
The Avantis U.S. Small Cap Value ETF (AVUV) is an actively managed exchange-traded fund designed to seek long-term capital appreciation by investing in U.S. small-cap companies that are trading at low valuations and exhibit higher profitability ratios. Launched on September 24, 2019, AVUV does not seek to replicate a specific index but rather uses a rules-based investment approach to select securities.
Key features of AVUV include:
Investment Strategy: The fund focuses on small-cap companies with attractive valuations and profitability metrics, aiming to enhance returns through active management.
Expense Ratio: AVUV has a gross and net expense ratio of 0.25%, making it cost-effective for investors.
Portfolio Management: The fund is managed by a team of experienced portfolio managers who leverage current market data to make investment decisions.
Diversification: AVUV offers broad exposure to small-cap value stocks, with holdings across various sectors, including industrials, consumer discretionary, and financials.
Performance: As of January 31, 2025, the fund had a YTD NAV total return of 1.93%. However, past performance is not indicative of future results.
Overall, AVUV is designed to fit seamlessly into an investor’s asset allocation, providing a balance between indexing benefits and active management.
Dimensional US Targeted Value ETF DFAT
The Dimensional US Targeted Value ETF (DFAT) is an actively managed exchange-traded fund designed to provide exposure to U.S. small and mid-cap value stocks. Launched on June 14, 2021, the fund aims to maximize after-tax returns through a tax-efficient investment strategy that delays and minimizes net capital gains while maximizing long-term capital gains.
DFAT uses a market capitalization-weighted approach to invest in a diverse group of U.S. companies with lower relative prices and higher profitability. The fund focuses on stocks that are considered value investments based on metrics such as price-to-book, price-to-cash-flow, and price-to-earnings ratios. Additionally, DFAT may adjust its holdings based on short-term factors like price momentum and investment characteristics to optimize returns.
Key features of DFAT include:
An expense ratio of 0.28%, making it cost-effective for investors.
Quarterly dividend distributions with a current yield of 1.5%.
Active management that allows for flexibility in adjusting portfolio exposures and reducing trading costs.
As of December 31, 2023, the fund’s portfolio included companies with market capitalizations below $12.89 billion, targeting the lower end of the U.S. market capitalization spectrum. The fund is managed by a team of experienced portfolio managers, including Jed Fogdall, Joel Schneider, Marc Leblond, and Joseph Hohn.
Overall, DFAT offers investors a tax-efficient and actively managed approach to accessing U.S. small and mid-cap value stocks, aiming to enhance long-term returns through a combination of value investing and dynamic portfolio management.