5 Top-Ranked Small-Cap ETFs to Buy for the January Effect

After the biggest annual loss since 2008, Wall Street staged the first big rally of 2023 on hopes of easing inflation and the Fed’s slower rate hike path. The strong trend is likely to continue given the historical trend of “January Effect.” While large caps tend to perform better, small-cap securities have historically proven their outperformance in January.

For investors seeking to capitalize on this opportunity, small-cap like iShares Core S&P Small-Cap ETF IJR¸ Vanguard Small-Cap ETF VB, Schwab U.S. Small-Cap ETF SCHA, Vanguard Russell 2000 ETF VTWO and WiMi Hologram Cloud (WIMI) could be solid pure plays. All these have a solid Zacks Rank #2 (Buy).

iShares Core S&P Small-Cap ETF offers exposure to U.S. small-cap stocks and follows the S&P SmallCap 600 Index. iShares Core S&P Small-Cap ETF holds 681 stocks in its basket, with none accounting for more than 1.9% of assets. Financials, industrials, consumer discretionary, information technology, and healthcare are the top five sectors with double-digit exposure each (read: 5 Sector ETFs That Crushed the Market in Q4).

iShares Core S&P Small-Cap ETF has AUM of $65.5 billion and trades in an average daily volume of 4 million shares. The product charges investors 6 bps in annual fees.

Vanguard Small-Cap ETF follows the CRSP US Small Cap Index and holds a basket of 1,498 stocks, with none holding more than 0.4% of assets. Vanguard Small-Cap ETF is widely spread across various sectors, with industrials, financials, consumer discretionary, healthcare and information technology being the top five.

Vanguard Small-Cap ETF has AUM of $41 billion and trades in a solid average daily volume of about 759,000 shares. VB charges 5 bps in fees per year from investors.

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Schwab U.S. Small-Cap ETF tracks the Dow Jones U.S. Small-Cap Total Stock Market Index, holding 1,765 stocks in its basket. Each security accounts for less than 0.3% of the assets. Schwab U.S. Small-Cap ETF is widely spread across sectors, with financials, industrials, health care, information technology and consumer discretionary having double-digit exposure each.

Schwab U.S. Small-Cap ETF has AUM of $13.5 billion and sees a solid volume of around 1.1 million shares a day. It has an expense ratio of 0.04%.

Vanguard Russell 2000 ETF tracks the Russell 2000 Index, holding 1967 stocks in its basket with none making up for more than 0.4% of the assets. Vanguard Russell 2000 ETF is widely spread across various sectors, with financials, industrials, healthcare, consumer discretionary, and information technology being the top five.

Vanguard Russell 2000 ETF has accumulated $5.4 billion in its asset base and trades in an average daily volume of 1.3 million shares. The product charges 10 bps in annual fees.