Small-cap index funds are investment vehicles that are designed to provide investors with a return that reflects the performance of an index of stocks with small market capitalizations. Companies that fall into the small-cap category typically have market caps between $300 million and $2 billion. Index funds are special types of mutual funds whose portfolios are designed to track a particular market index, such as the S&P 500, or in the case of small-cap stocks, the Russell 2000 Index.
Here are the top 5 small-cap U.S. index funds ranked by 1-year total return. All of the funds below have had negative total returns over the past year, but they are still the best performers amid equity markets that have fallen dramatically over the past month. Funds with less than $50 million in assets under management (AUM) have been excluded due to insufficient liquidity. All numbers are as of June 2020.
- Individual small cap stocks offer higher growth potential, and small cap value index funds outperform the S&P 500 in the long run.
- Small caps also experience higher volatility, and individual small companies are more likely to go bankrupt than large firms, so the opportunities of small caps are best suited to investors who are willing to accept more risk in exchange for higher potential gains.
- Here we look at 5 mutual funds that track small-cap indices.
Ivy ProShares Russell 2000 Dividend Growers Index I (IRUIX)
- 1-year Trailing Total Return: -10.57%
- Expense Ratio: 0.65%
- Assets Under Management: $85.6 million
- Dividend Yield: 2.65%
- Inception Date: April 20, 2017
- Fund Family: Ivy Funds
IRUIX is a mutual fund that follows a blended strategy, investing in both growth and value stocks. The fund seeks results, before fees and expenses, that track the performance of the Russell 2000 Dividend Growth Index. The index is designed to represent the performance of companies with small and medium market capitalizations within the Russell 2000 Index and which consistently increase dividends. IRUIX's top three holdings are Pennant Group Inc. (PNTG), Northwest Natural Holding Co. (NWN), and Quaker Chemical Corp. (KWR).
Fidelity Small Cap Index (FSSNX)
- 1-year Trailing Total Return: -1.6%
- Expense Ratio: 0.025%
- Assets Under Management: $10.7 billion
- Dividend Yield: 1.54%
- Inception Date: September 8, 2011
- Fund Family: Fidelity Investments
FSSNX is a mutual fund that follows a blended strategy, investing in both growth and value stocks. The fund seeks to provide investment results that reflect the total return of stocks of small-cap U.S. companies. FSSNX normally invests at least 80% of its assets in securities included in the Russell 2000 Index, which is a market capitalization-weighted index designed to represent the performance of small-cap U.S. equities. The fund's top three holdings are E-mini Russell 2000 Index Futures, Haemonetics Corp. (HAE), and NovoCure Ltd. (NVCR).
MM Russell 2000 Small Cap Index I (MCJZX)
- 1-year Trailing Total Return: -2%
- Expense Ratio: 0.21%
- Assets Under Management: $262.5 million
- Dividend Yield: 1.79%
- Inception Date: July 26, 2012
- Fund Family: MassMutual
MCJZX invests in both growth and value small-cap U.S. stocks. The fund seeks to provide results that approximate the total return of the Russell 2000 Index. The fund invests at least 80% of its net assets in equities within the index and in Russell 2000 Index futures contracts. MCJZX's top three holdings are Teladoc Health Inc. (TDOC), NovoCure Ltd. (NVCR), and Generac Holdings Inc. (GNRC).
Northern Small Cap Index (NSIDX)
- 1-year Trailing Total Return: 1.46%
- Expense Ratio: 0.15%
- Assets Under Management: $1.1 billion
- Dividend Yield: 1.29%
- Inception Date: September 3, 1999
- Fund Family: Northern Funds
NSIDX is passively managed and invests in both growth and value stocks of small-cap U.S. companies. The fund seeks to provide investment returns that reflect the total return of the Russell 2000 Index. It typically invests over 80% of its net assets in securities included in the index as well as in Russell 2000 Index futures. NSIDX uses computer programs and statistical procedures to make portfolio decisions. The fund's top holdings are NovoCure Ltd. (NVCR), The Medicines Co., and Generac Holdings Inc. (GNRC).
Praxis Small Cap Index (MMSIX)
- 1-year Trailing Total Return: -5.66%
- Expense Ratio: 0.45%
- Assets Under Management: $114.8 million
- Dividend Yield: 1.13%
- Inception Date: May 1, 2007
- Fund Family: Praxis Mutual Funds
MMSIX tries to track the S&P 600 small cap index, while incorporating environmental, social, and governance (ESG) screening elements. Its prospectus says that it tries to avoid companies that conflict with its core values, among which are "respecting the dignity and value of all people," "exhibiting responsible management practices," and "practicing environmental stewardship." One percent of the fund's assets are earmarked for "community development investing," Its top holdings are Community Healthcare Trust (CHCT), Select Medical Holdings (SEM), and CSG Systems (CSGS).
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