Small-cap stocks and ETFs are regaining their shine as bargain hunting investors poured money into them over the past few weeks. This rebound came as we saw a broader rotation into cheaper areas of the market.
In addition to attractive valuations, easing of trade tensions also benefitted small-cap stocks. Further, recent economic reports suggest that the US economy remains on solid footing. Small-cap companies are more sensitive to the health of the US economy as they are domestically oriented.
However, investors should remember that small-cap stocks are riskier than larger stocks. Further, they are in an earnings recession currently.
The two most popular small cap ETFs—the iShares Core S&P Small Cap ETF (IJR - Free Report) and the iShares Russell 2000 ETF (IWM - Free Report) have delivered significantly different returns historically.
Since December 1993, the S&P SmallCap 600 has outperformed the Russell 2000 with lower volatility; it has gained 10.44% versus Russell 2000’s 8.78%, according to a study conducted by S&P Dow Jones.
To learn more about these ETFs, please watch the short video above.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>