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Should IQ Chaikin U.S. Small Cap ETF (CSML) Be on Your Investing Radar?

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Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the IQ Chaikin U.S. Small Cap ETF (CSML - Free Report) is a passively managed exchange traded fund launched on 05/16/2017.

The fund is sponsored by New York Life Investments. It has amassed assets over $203.98 million, making it one of the average sized ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even 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

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.35%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.67%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 26.80% of the portfolio. Industrials and Information Technology round out the top three.

Looking at individual holdings, Dillards Inc-Cl A (DDS - Free Report) accounts for about 0.62% of total assets, followed by Kezar Life Sciences Inc (KZR - Free Report) and Liquidia Corp (LQDA - Free Report) .

The top 10 holdings account for about 4.6% of total assets under management.

Performance and Risk

CSML seeks to match the performance of the NASDAQ Chaikin Power US Small Cap Index before fees and expenses. The NASDAQ Chaikin Power US Small Cap Index is a rules-based, quantitative index designed to enhance the NASDAQ US 1500 Index, by selecting stocks with the highest Chaikin Power Gauge rating.

The ETF has lost about -11.05% so far this year and is down about -7.37% in the last one year (as of 05/31/2022). In the past 52-week period, it has traded between $30.22 and $38.36.

The ETF has a beta of 1.26 and standard deviation of 31.26% for the trailing three-year period. With about 480 holdings, it effectively diversifies company-specific risk.

Alternatives

IQ Chaikin U.S. 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, CSML 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 $55.33 billion in assets, iShares Core S&P SmallCap ETF has $66.11 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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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