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FDM also still has a higher weighted average market cap than IWC at about $820 million.īut, FDM at least screens for liquidity and strong financials, while IWC does not. While IWC has over 1,000 holdings, FDM only has about 150, so it’s arguably less diversified and differs in sector weightings. The First Trust Dow Jones Select MicroCap Index Fund (FDM) has an AUM of about $150M.įDM seeks to track the Dow Jones Select Microcap Index. Popularity and liquidity drop off steeply after IWC. Let’s check out options for micro cap ETFs.įDM – First Trust Dow Jones Select MicroCap Index Fund For ones like BRSIX that are open to new investors, minimum initial investments may differ among different brokers.

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WMICX has far outperformed the others on this list historically, but it comes at an astronomical cost of 1.66%.įeel free to research these options. BRSIX – Bridgeway Ultra Small Company Market Fund.DFSCX – Dimensional US Micro Cap Portfolio Fund.RYOTX – Royce Micro-Cap Fund Investment Class.Moreover, the policies of asset management companies typically prevent fund managers from buying these illiquid, low-price-per-share stocks.Īctive funds that have emerged over the years to buy true micro cap stocks are either closed to new investors, are unavailable to retail investors, have high minimum investments, and/or command extremely high fees. Ironically, the theory goes that micro caps pay a significant premium precisely because of that illiquidity and volatility. This is because micro cap stocks by nature aren’t very investable due to their relative illiquidity and extreme volatility. The problem with most micro cap funds is that they’re usually not really micro cap funds. Some even consider micro caps a proxy for private equity, with comparatively greater transparency and liquidity. Since we can’t readily access micro cap value, we’re essentially placing a larger bet on beta by buying a micro cap fund. So ideally, we’d buy a micro cap value fund that captures cheap stocks with strong financials to tilt Value and Profitability within micro caps, right? Unfortunately, no such product exists unless Dimensional launches an ETF equivalent of their US Micro Cap Portfolio mutual fund (DFSCX) for the public. Lastly, micro caps per se may even provide a diversification benefit inside U.S. This is why small cap value is usually the golden child of the market. That is, factors like Value and Profitability pay higher premiums and are more statistically significant in smaller stocks. Secondly, remember that factor premia get stronger as we go smaller. Micro caps have indeed outperformed other cap sizes historically: Source: It’s somewhat of a forgotten segment of the market, as these stocks are the most volatile, and there aren’t many products available to capture them.įirst, remember the Size factor premium – small stocks tend to outperform large stocks because small stocks are riskier, so investors are compensated for that risk. Micro cap stocks are smaller than small cap stocks. The Best Bond Funds Out There – 13 ETFs.

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