This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Small Cap Growth ETFs: A Guide

Stocks in this article: IJT VBK IWO

NEW YORK ( TheStreet) -- Small cap ETFs are leading the markets higher in 2010. I looked at domestic core ETFs Tuesday. Today, I turn to the growth funds.

Growth has been the underperforming half of the small-cap market this year, while value has outperformed. These growth funds are still up around 8% to 11% through May 11, well ahead of the 4.4% return for the SPDR S&P 500 (SPY), but the gap between the iShares S&P Small Cap 600 Growth (IJT) and Value (IJS) is about 3%, for example.

A big reason for the difference between growth and value is sector allocation. Small cap financials have done well this year, with mutual fund FBR Small Cap Financials (FBRSX) up more than 20% in 2010; value tends to have larger financial allocations.

The performance gap between small-cap growth ETFs, however, is much narrower. Year to date, the gap between iShares Morningstar Small Cap Growth (JKK) and Vanguard Small Cap Growth (VBK) is less than 3%.

The funds tend to have similar portfolios, and the ones with the largest deviation from the group have been underperforming this year. Therefore, it requires digging a bit deeper to see which ETFs are the best in the pack.

A comparison of volume shows that three funds attract most of the trades : iShares Small Cap 600 Growth (IJT), iShares Russell 2000 Growth (IWO) and Vanguard Small Cap Growth (VBK). Of the three, IWO dominates with more than five times the volume of the other two funds combined. Traders will definitely find IWO the better choice.

IWO holds 1,276 stocks, more than triple the holdings in IJT and ahead of VBK's 1,000 holdings. In terms of sector allocations, the three funds are very similar.

There are few major differences that stand out. One is the 24% heath care exposure in IWO, which is more than the 18% in the other two ETFs. Where IJT is underweight health care (relative to IWO), it is overweight financials, with exposure nearly double the other two funds, at 14% of assets. VBK, meanwhile, takes a balanced approach, with technology and industrial exposure about 3% higher than the other funds, at 26% and 15%, respectively.

This balanced approach makes VBK a better choice for long-term, buy-and-hold investors because the fund is less likely to fluctuate from sector exposure.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs