An exchange-traded fund (ETF) that aims to invest in a market’s smallest companies (small cap). Small cap companies are subject to certain criteria in terms of size (market capitalization): the total value of all the company’s stock ranges between USD 250 million and USD 2 billion. Small-caps ETFs present an investment vehicle whereby exposure is established to the world’s smallest, and fast growing, companies without having to undertake the cumbersome analysis and screening for individual companies (in order to select the mid-range performers with potential growth).
Small-cap ETFs are typically concentrated in the smallest companies, with certain, limited allocations to other sizes. Small-cap companies appeal to investors for several reasons including growth potential, long-term performance, diversification, size considerations (more affordable stock prices), among others.
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