Exchange-traded funds can be an investor's best friend. They offer an inexpensive way to get exposure to the market and have much greater trading flexibility than traditional mutual funds. But as ETFs' popularity has soared, so has the number of funds available. There are now hundreds of ETFs, so a potential investor has to do a lot of searching to find the specific fund that's right for him or her. Below, we examine some of the best small-cap ETFs around, so if you are in the market for some small-cap exposure, listen up.
If you want to stick as close to the traditional small-cap benchmark as possible, an index tracker such as the iShares Russell 2000 Index ETF
If you're looking to track a slightly different small-cap benchmark, try the Vanguard Small-Cap ETF
On the other hand, if you're willing to take a slight bet on some active management, the iShares Morningstar Small Core ETF
While it's usually not necessary to buy style-specific funds at the small-cap level, if you find yourself in need of such an investment, there are a few options. One of the better small-value funds is the iShares S&P 600 Value ETF
On the growth side, the Vanguard Small-Cap Growth ETF
A parting reminder
Whichever route you take to get your small-cap exposure, steer clear of leveraged and bear market funds. Don't try to double up on the return of the small-cap market in an attempt to make some quick money; that's gambling, not investing. And don't try to time the market by getting into a bear market fund in anticipation of a market drop. Investors are notoriously bad at making market timing calls like this. Bear market funds go down more often than they go up, so stay away from ETFs that short the small-cap market. Stick to broad, well-diversified funds, and your ETF experience is likely to be a positive one.
Whether you prefer exchange-traded funds or traditional mutual funds, let fund expert Shannon Zimmerman show you which funds are worthy of your investment dollars. Check out the Fool's Champion Funds newsletter with a free 30-day trial today.