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Should iShares Morningstar SmallCap Growth ETF (JKK) Be on Your Investing Radar?

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Launched on 06/28/2004, the iShares Morningstar SmallCap Growth ETF is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Growth segment of the US equity market.

The fund is sponsored by Blackrock. It has amassed assets over $259.41 million, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.

Why Small Cap Growth

With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.

While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Also, growth stocks are a type of equity that carries more risk compared to others. Compared to value stocks, growth stocks are a safer bet in a strong bull market, but don't perform as strongly in almost all other financial environments.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.30%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.20%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 25.20% of the portfolio. Healthcare and Consumer Discretionary round out the top three.

Looking at individual holdings, Match Group Inc (MTCH - Free Report) accounts for about 2.98% of total assets, followed by Carvana Class A (CVNA - Free Report) and Solaredge Technologies Inc (SEDG - Free Report) .

The top 10 holdings account for about 12.86% of total assets under management.

Performance and Risk

JKK seeks to match the performance of the Morningstar Small Growth Index before fees and expenses. The Morningstar Small Growth Index measures the performance of stocks issued by small-capitalization companies.

The ETF has added about 11.46% so far this year and is up about 22.32% in the last one year (as of 09/30/2020). In the past 52-week period, it has traded between $142.18 and $246.49.

The ETF has a beta of 1.20 and standard deviation of 26.32% for the trailing three-year period, making it a medium risk choice in the space. With about 240 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Morningstar SmallCap Growth ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, JKK is an excellent option for investors seeking exposure to the Style Box - Small Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares Russell 2000 Growth ETF (IWO - Free Report) and the Vanguard SmallCap Growth ETF (VBK - Free Report) track a similar index. While iShares Russell 2000 Growth ETF has $9.05 billion in assets, Vanguard SmallCap Growth ETF has $11.08 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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