If you're interested in broad exposure to the Small Cap Growth segment of the US equity market, look no further than the Invesco S&P SmallCap Momentum ETF (XSMO Quick QuoteXSMO - Free Report) , a passively managed exchange traded fund launched on March 3, 2005.

The fund is sponsored by Invesco. It has amassed assets over $1.84 billion, making it one of the larger ETFs attempting to match the Small Cap Growth segment of the US equity market.

Why Small Cap Growth

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.

Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. They are likely to outperform value stocks in strong bull markets but over the longer-term, value stocks have delivered better returns than growth stocks in almost all markets.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.39%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.84%.

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 Financials sector -- about 20.2% of the portfolio. Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Mr Cooper Group Inc (COOP) accounts for about 2.83% of total assets, followed by Brinker International Inc (EAT) and Corcept Therapeutics Inc (CORT).

The top 10 holdings account for about 22.37% of total assets under management.

Performance and Risk

XSMO seeks to match the performance of the S&P SMALLCAP 600 MOMENTUM INDEX before fees and expenses. The S&P Smallcap 600 Momentum Index is composed of securities with strong growth characteristics selected from the Russell 2000 Index.

The ETF has gained about 10.3% so far this year and is up about 11.14% in the last one year (as of 09/02/2025). In the past 52-week period, it has traded between $55.15 and $73.72.

The ETF has a beta of 1.03 and standard deviation of 21.63% for the trailing three-year period. With about 119 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P SmallCap Momentum ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XSMO is a good option for those seeking exposure to the Style Box - Small Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 Growth ETF (IWO) and the Vanguard Small-Cap Growth ETF (VBK) track a similar index. While iShares Russell 2000 Growth ETF has $12.35 billion in assets, Vanguard Small-Cap Growth ETF has $20.09 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.

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.