7 Best Small Cap ETFs for Small Cap Stocks in 2024

Small cap stocks have delivered greater returns than large cap stocks historically. In this video we'll review some of the best small cap ETFs to capture that risk premium.

// TIMESTAMPS:

00:00 - Intro
00:14 - Why Small Cap Stocks?
01:11 - VB – Vanguard Small-Cap ETF
01:29 - ISCB – iShares Morningstar Small-Cap ETF
01:56 - IJR – iShares Core S&P Small-Cap ETF
02:27 - VIOO – Vanguard S&P Small-Cap 600 ETF
02:51 - SPSM – SPDR Portfolio S&P 600 Small Cap ETF
03:12 - SCHA – Schwab U.S. Small-Cap ETF
03:41 - VSS – Vanguard FTSE All-World ex-US Small-Cap ETF
04:05 - My Choice
04:13 - Small Cap Value
04:31 - Outro

// SUMMARY:

So first let's briefly talk about why we'd be interested in small cap stocks in the first place. Small cap stocks account for roughly only 6% of a total market index fund by weight, so many investors like to overweight or tilt toward small cap stocks due to their historical outperformance.

Small cap stocks tend to have more room to move than large caps, so they exhibit greater volatility. More importantly, small caps are more risky than more stable, large-cap stocks. Because of this, investors demand higher returns for this greater risk, so small cap stocks have historically paid a risk premium, referred to as the Size factor premium. As an added bonus, small caps aren't perfectly correlated with large caps, potentially offering a small diversification benefit.

Including small caps also took the famous 4% Rule (a safe withdrawal rate estimate for retirement) up to 4.5% historically.

So now that we know why small caps may deliver market outperformance, let's explore the best small cap ETFs:

VB – Vanguard Small-Cap ETF
ISCB – iShares Morningstar Small-Cap ETF
IJR – iShares Core S&P Small-Cap ETF
VIOO – Vanguard S&P Small-Cap 600 ETF
SPSM – SPDR Portfolio S&P 600 Small Cap ETF
SCHA – Schwab U.S. Small-Cap ETF
VSS – Vanguard FTSE All-World ex-US Small-Cap ETF

#etfs #smallcapstocks #smallcapfunds

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// SOCIAL

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[OptimizedPortfolio]

Do you own any of these small cap ETFs?

[Omar-etsb]

AVGV and chill. :)
(for a one-fund-solution for all value sizes/markets)

But def AVUV for specific SCV exposure.

[stewdogg]

I enjoy your videos. Thank you. I own SPSM in my Roth IRA.

[DrWild]

I know you like AVUV and AVDV for small cap value. Do you think AVEE is worth the expense ratio?

[videodvd]

Great video! I own VBR and AVUV for the small cap portion of my port. Looking to add small cap growth as we get closer to interest rate cuts. Thinking both VB and VIOO

[Tay]

Avgv for the win! Best 6 in 1 fund out there

[rpshah]

Surprised DFAS or AVSC weren’t mentioned. I think those ETFs are better than the ones in the videos since they do profitability screening and are more diversified than the S&P Small Cap 600.

[thiagosouza]

I own small cap value: SLYV + ISVL + DGS plus neutral base VT

[antonisl]

Any equivalents of these for EU investors?

[peterfischer]

You might have mentioned the dividend yields.

[shmerlingz]

I own IJR, hopefully it will pay off one day...

[Brent]

I own AVUV which has been a terrible investment this year with high expense ratio. YTD it is underperforming Vanguard VBR by exactly 2%. VBR has an expense ratio of 0.07% while AVUV has an expense ratio of 0.25%. YTD, VBR is up a whopping 0.54%.