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Top 10 U.S. Small-Cap, Mid-Cap ETFs

VB (Vanguard Small-Cap ETF) tracks the MSCI US Small Cap 1750 Index which of course means the universe of 1750 small cap stocks in U.S. markets. The fund was launched in January 2004. AUM equal $4.4 billion and average daily trading volume exceeds 375K shares. The expense ratio is .15% which is low among its peers. The current dividend yield is 1.11% based on an annual dividend of $.84. As of June 2011 the YTD return is approximately 3.50%.

Data as of June 2011

VB Top Ten Holdings & Weightings

  1. Informatica Corporation (INFA):                                   0.28%
  2. VeriFone Systems, Inc. (PAY):                                     0.27%
  3. SM Energy Company (SM):                                         0.27%
  4. SandRidge Energy, Inc. (SD):                                      0.27%
  5. JDS Uniphase Corporation (JDSU):                             0.27%
  6. CMT Market Liquidity Rate:                                         0.27%                                                      
  7. TIBCO Software, Inc. (TIBX):                                      0.26%
  8. Polycom, Inc. (PLCM):                                                 0.25%
  9. Tractor Supply (TSCO):                                               0.25%
  10. Brigham Exploration Company (BEXP):                        0.25%

IWO (iShares Russell 2000 Growth ETF) tracks the Russell 2000 Growth Index which includes the 2000 small cap companies in the U.S. equity market. The fund was launched in July 2000. The expense ratio is .25%. AUM exceeds $4 billion and average daily trading volume is over 1.8M shares. As of June 2011 the dividend yield is .35% based on an annual dividend of $.32. The YTD return is approximately 4.20%.

Alternative choices include IJT (iShares S&P SmallCap 600 Growth ETF) which follows the S&P SmallCap 600/Citigroup Growth Index. It features an expense ratio of .25%. AUM equal $1.8 billion with average daily volume of 214K shares and YTD return of over 6%. Also available is VBK (Vanguard Small-Cap Growth ETF) tracks the MSCI US Small Cap Growth Index. AUM exceeds $2.2 billion and average daily trading volume is only 230K shares indicating an ETF more likely with financial advisor portfolios given the lower fee. As of June 2011 YTD performance is roughly 5.60%.

Data as of June 2011

IWO Top Ten Holdings & Weightings

  1. Riverbed Technology, Inc. (RVBD):                             0.77%
  2. TIBCO Software, Inc. (TIBX):                                      0.71%
  3. Rackspace Hosting, Inc. (RAX):                                   0.64%
  4. VeriFone Systems, Inc. (PAY):                                     0.62%
  5. Brigham Exploration Company (BEXP):                        0.55%
  6. Acme Packet, Inc. (APKT):                                           0.54%
  7. Nordson Corporation (NDSN):                                     0.54%
  8. Deckers Outdoor Corporation (DECK):                        0.53%
  9. Polaris Industries, Inc. (PII):                                         0.52%
  10. Pharmasset, Inc. (VRUS):                                            0.49%

 

VBR (Vanguard Small-Cap Value ETF) follows the MSCI US Small Cap Value Index. The fund was launched in January 2004. The expense ratio is the lowest in the group at .15%. AUM are near $2.2 billion while average daily trading volume is only 120K shares which indicates a high use by financial advisors attracted by the lower expense ratio. The annual dividend is $1.27 making the yield 1.85%. YTD performance as of June 2011 is approximately 1.40%.

Alternative choices include IWN (iShares Russell 2000 Value ETF) tracks the Russell 2000 Value Index and is the oldest of the group being launched in July 2000. It also has the highest expense ratio at .41%. IJS (iShares S&P SmallCap 600 Value ETF) follows the S&P SmallCap 600/Citigroup Value Index and completes the value area selections for now. It was launched in July 2000 and has an expense ratio of .25%.  

Data as of June 2011

VBR Top Ten Holdings & Weightings

  1. Corn Products International, Inc. (CPO):                     0.46%
  2. Camden Property Trust (CPT):                                    0.46%
  3. Domtar Corporation (UFS):                                          0.46%
  4. Essex Property Trust (ESS):                                        0.46%
  5. Williams-Sonoma, Inc. (WSM):                                     0.46%
  6. Tupperware Brands Corporation (TUP):                      0.45%
  7. Hubbell, Inc. B (HUB.B                                                  0.44%
  8. American Capital Agency Corp. (AGNC):                     0.43%
  9. Snap-on, Inc. (SNA):                                                    0.41%
  10. Waddell & Reed Financial, Inc. (WDR):                        0.41%

As with other sectors, remember ETF sponsors must issue and their interests arenâ¿¿t aligned with yours. They have a business interest and wish to have a competitive presence in any popular sector.

Mid and small-cap ETF sectors have responded well to preexisting Fed policies of ZIRP (Zero Interest Rate Policies) and especially well to QE (Quantitative Easing). Since these sectors have higher betas (volatility and risk), they can outperform on the upside when markets are moving higher abetted by Fed policies. Naturally, the opposite can and will occur when markets correct or head south. We advise risk averse investors to use caution in this regard.

For further information about portfolio structures using this or other ETFs see www.etfdigest.com .

You may address any feedback to: feedback@etfdigest.com   

(Source for holding data is from ETF Database and from various sponsors.)

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of ETF Digest, Dave's Daily blog and the best-selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management, published by Wiley Finance in 2008. A detailed bio is here: Dave Fry.

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