Small caps offer a variety of investment opportunities, both emerging and developed, and they are also the ones that offer the greatest potential for “well-chosen” growth. Many of them are leaders in their home markets, innovative and capable of transferring value addition.
And as can be seen, it’s emerging small caps that have stood out for profitability so far this year, with returns close to 10%, while the United States’ Russell 2000 barely manages more than 0.5% . For its part, Europe and the world offer low single-digit returns.
And if we dig deeper, we see that fundamentals continue to support a recovery in this type of company in general, but with greater strength in emerging markets, which have the potential to grow by more than 40%. Currently trading forward per share. 11.6x. versus the current P/E of 16.96x, indicating price erosion due to the favorable earnings prospects for these great little gems. Furthermore, they are the ones that offer the highest dividend yield to their participants.
But What are small caps? These are companies with a market capitalization of between $200 million and $2 billion. These types of companies are, for the most part, family businesses and, in the case of many countries such as Spain, represent an important generation of employment and contribution to GDP, in addition to being a reliable reflection of a country’s status . being too local.
They were severely punished during the pandemic as their liquidity in the stock market is low and hence exiting the market increases their value significantly. Investing in them may seem like an easy task, but in fact it is not, as it is necessary to carefully analyze their balance sheets and, especially, with the current environment of interest rates, their indebtedness and cash generation, as it may give more Maybe a fear..
Furthermore, they are companies that, since it was established that managers have to pay for analysis or pass it on to the client, many of them stopped covering the broad spectrum of these crown jewels.
Therefore, ETFs, like specialized active management funds, have taken center stage, as they are a great way to reduce the volatility of individual stocks, and so we’re going to list the best small cap ETFs to consider when adding this pillar to your portfolio. Let’s propose.
Best ETFs to Invest in Small Cap
Among those to emerge are:
Now, if we want a ETFs focus more on European small capsAs for the second most attractive in terms of valuation and upside potential, we’d point to the following:
And finally, if what we’re looking for is what we always repeat, which is diversification at its maximum degree, then More Global Small Cap ETFs Like,
We reiterate the need to consider investing in these smaller companies in terms of market capitalisation, but which can become the leaders of tomorrow.
If you want to invest with ETFs, you can do so through Scalable Capital, which has over 1,700 ETFs available to invest in.
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