Best ETFs in Small-Cap, Mid-Cap Space

Small-cap and mid-cap stocks have been able to find relative refuge amid the market turbulence, and there are a number of ETF choices that can take advantage of this trend.

ETFs that track these two areas have been outperforming the market in the first half of the year. The iShares S&P Small Cap 600 Index(IJR Quote) is trading right around where it was at the beginning of the year, while the iShares S&P Mid Cap 400 Index(IJH Quote) is up 2.5% year to date.

Overall, these might not be eye-catching performances, but they compare quite favorably to the S&P 500, which is down 7.3% so far this year.

The returns that these ETFs have afforded investors underscore the value that can be achieved with even a slight degree of fine-tuning to an index investor's portfolio.

"There is plenty of benefit in being somewhat active in picking niche sub-index ETFs," says Will McClatchy, Founder and Editor of ETFZone.com. "If you want to be active, pick sub-index ETFs."

Sub-index ETFs have been gaining an increasing amount of attention as the broader markets have continued to remain volatile. Within the small-cap and mid-cap space, there are ETFs geared toward growth investors as well as value investors.

The Vanguard Small Cap Growth ETF(VBK Quote) has been ahead of the market thus far in 2008 with a -0.5% return. Its holdings include names such as Priceline.com(PCLN Quote), Petrohawk Energy(HK Quote) and FLIR Systems(FLIR Quote).

Another sub-index ETF that has performed particularly well relative to the S&P 500 is the iShares S&P Mid Cap 400 Growth Index(IJK Quote). It is up 3.7% year to date and holds positions in companies such as Southwestern Energy(SWN Quote), Intuitive Surgical(ISRG Quote) and Cleveland-Cliffs(CLF Quote).