Microcap ETF: A Tough Segment To Invest In Now Made Easier

Barclays Global Investors are generally considered to be the leaders when it comes to creating new exchange traded funds (ETFs). But every now and again they misstep and another firm fills a particular niche first.

Fortunately for Barclays, they beat their competitors to the punch with a microcap offering, but only by a few days. This microcap ETF (ticker IWC) tracks the bottom 3% of the Russel smallcap index. I use this ETF to fill the microcap allotment in my portfolio.

A few days after the Barclays offering, PowerShares released their own microcap product (symbol PZI). The PowerShares offering differs from the type I generally buy in to in that it is an actively managed exchange traded fund. The actively managed aspect is supposed to improve returns, but it doesn't seem right to me. If you're looking for something with a money manager in control, there are plenty of regular funds worth looking at.

And following on the heels of both of these ETFs, was one from The First Trust Advisors (symbol FDM). Their portfolio tracks the Dow Jones Select MircoCap Index. This exchange traded fund attempts to eliminate companies that have poor fundamentals through an examination of profit margin, earnings momentum, and historical return.

And finally, for those of you that like looking at graphs, take a look at the following which shows performance of these 3 microcap ETFs compared to an S&P 500 ETF (SPY) in black.

IWC vs. PZI vs. FDM
1 Star2 Stars3 Stars4 Stars5 Stars (1 votes, average: 4.00 out of 5)

Leave a Reply

Your email address will not be published. Required fields are marked *

Notify me of followup comments via e-mail.