Top International Small-Cap Funds: An Overview

Small-cap ETF securities often demonstrate superior long-term performance compared to larger counterparts and may be less risky due to enhanced diversification. International small-cap firms offer similar benefits, providing geographic diversification beyond the United States.

Due to these advantages, investors are particularly drawn to small-cap firms operating overseas. This article examines the benefits of investing in small- cap companies located abroad and suggests some of the most effective cap funds for boosting portfolio exposure.

Why Invest In Small Caps?

Typically, publicly traded companies with less than $2 billion in market capitalization own small-cap stocks. Though this may seem small, most leading stocks have a market value of at least $10 billion. Large companies dominate market capitalization-weighted indexes, leading to an imbalance.

Investors can weather market downturns and reduce portfolio volatility by diversifying their equity across less-correlated assets. Their wealth may remain stable during a bull market, declining less during a bear one. Investing in small-cap ETF stocks offers several benefits:

One major reason to purchase small caps is the diversification they provide. By investing in small-cap firms with a lower correlation to the overall market, you can diversify your wealth. The correlation between the Schwab U.S. Small-Cap ETF (SCHA) and the S&P; 500 is just 0.877, compared to 0.998 for the Schwab U.S. Large-Cap ETF (SCHX).

Furthermore, investing in small caps may offer better ROI with more opportunities for significant gains. According to research, small-cap stocks outperform large-cap equities over the long run. Value stocks outperform growth stocks over time, while small-cap stocks consistently beat large-cap companies.

Best Small Cap Funds

Vanguard Small Cap Value ETF

Even if the term “small-cap value” may not be immediately clear, Vanguard bases its investments in small-cap ETF firms on factors such as price-to- book, debt-to-equity, dividend yield, and cash flow. The Vanguard Small Cap Value ETF aims to target undervalued small-cap companies for substantial gains. With $13 billion in assets and a 0.07% cost ratio, VBR remains the best small-cap ETF , even if value has lagged behind growth since the Great Recession.

Unlike other mutual funds on this list, VBR tracks over 800 companies through an index portfolio. Three-quarters of this portfolio’s holdings are financials, more than similar products. Various dealers can readily purchase and sell shares since over 300,000 are traded daily. Even if some equities are midcaps, the cap fund favors larger market capitalizations within the same industry.

iShares Core S&P; Small Cap ETF (IJR)

This IJR ETF includes fewer firms than others on our list but offers cost- effectiveness and accessibility. It is considered the best small-cap ETF with a greater trading volume, which can be rare. Although not the lowest, the expense ratio of 0.07% is favorable for this exposure.

Since 2000, when the dot-com bubble ended, IJR has amassed $41 billion. Moreover, the fund tracks the S&P; Small-Cap 600 Index while making its own financial decisions. In a 602-stock market, many tiny and inactive firms exist. Thus, IJR provides the best liquidity and lowest expenses among small- cap ETFs.

Vanguard FTSE All-World ex-U.S. ETF (VSS)

The FTSE All-World ex-U.S. Small Cap ETF from Vanguard simplifies purchasing international small-cap funds. The product aligns with the FTSE Global ex-U.S. Small Cap Net Tax Index, offering market-weighted access to small- cap ETF foreign companies.

Despite being more costly than domestic options, the fund’s 0.13% charge ratio is reasonable for its investments. The highest weights are in Japanese, Canadian, and British stocks, with a significant 16% in Japanese equities.

The fund manages about $5 billion and transfers 230,000 shares daily. Due to their lower liquidity, international best small-cap ETFs have 0.11% standard deviations. Even in a market where international equities sometimes lag, VSS pricing and availability remain strong.

SPDR S&P; 600 Small Cap Growth ETF (SLYG)

Many small-cap purchasers seek rapid growth, and the SPDR S&P; 600 Small Cap Growth ETF (SLYG) caters to that desire. Investing in this ETF allows access to promising new firms.

Beyond that, SLYG closely resembles the S&P; Small Cap 600 Growth. Movement, earnings-to-price ratio, and sales growth are required for a company to achieve these standards. The 0.15% price makes it more costly than some competing options. Apart from a few equities, the cap fund transfers 400,000 shares daily and holds over $2 billion in assets.

WisdomTree U.S. Small Cap Dividend ETF (DES)

There are various ways to earn with small-cap ETF stocks, and the WisdomTree U.S. Small Cap Dividend ETF (DES) offers income without sacrificing growth. The DES fund has the highest cost ratio at 0.38%, but its monthly income payments help balance this out.

The portfolio weights assets based on dividend yield rather than market size by tracking the WisdomTree U.S. Small Cap Dividend Index. The fund focuses less on technology and banking and more on stable, income-generating sectors like real estate, energy, and consumer spending. Although it manages $2 billion in assets, over 200,000 shares are moved daily on average.

Fidelity ZERO Extended Market Index Fund (FZIPX)

Following the Fidelity U.S. Extended Investable Market Index, this fund offers a cost-effective way to invest in the small-cap sector of the US stock market due to its zero charge ratio.

Most of the companies in FZIPX’s holdings are value-oriented. The portfolio’s top holdings resemble its standard index: consumer market names, tech companies, healthcare shares, and financial returns. This best small-cap ETF , which requires no minimum investment or management fee, may attract mutual fund investors looking to enter the small-cap market.