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Should SPDR S&P 600 Small Cap ETF (SLY) Be on Your Investing Radar?

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Launched on 11/08/2005, the SPDR S&P 600 Small Cap ETF (SLY - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Blend segment of the US equity market.

The fund is sponsored by State Street Global Advisors. It has amassed assets over $1.85 billion, making it one of the larger ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

Small cap companies have market capitalization below $2 billion. They usually have higher potential than large and mid cap companies with stocks but higher risk.

Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.15%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 1.36%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 18.80% of the portfolio. Industrials and Information Technology round out the top three.

Looking at individual holdings, Macy's Inc (M - Free Report) accounts for about 0.82% of total assets, followed by Omnicell Inc. (OMCL - Free Report) and Chart Industries Inc. (GTLS - Free Report) .

The top 10 holdings account for about 5.89% of total assets under management.

Performance and Risk

SLY seeks to match the performance of the S&P SmallCap 600 Index before fees and expenses. The S&P SmallCap 600 Index measures the performance of the small-capitalization sector in the US equity market.

The ETF has lost about -6.15% so far this year and is up roughly 0.87% in the last one year (as of 03/29/2022). In the past 52-week period, it has traded between $88.86 and $104.37.

The ETF has a beta of 1.18 and standard deviation of 29.63% for the trailing three-year period, making it a medium risk choice in the space. With about 605 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR S&P 600 Small Cap 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, SLY is an excellent option for investors seeking exposure to the Style Box - Small Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares Russell 2000 ETF (IWM - Free Report) and the iShares Core S&P SmallCap ETF (IJR - Free Report) track a similar index. While iShares Russell 2000 ETF has $63.72 billion in assets, iShares Core S&P SmallCap ETF has $72.51 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

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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