How do I invest in USA Small Cap stocks?

It is well known that companies with smaller market capitalizations generate higher returns over the long term. However, they also come with higher risks that investors should efficiently manage. Diversification of investments with ETFs is the safest bet for an independent investor to approach the small cap stocks.

There are essentially three indices available to invest with ETFs in USA small cap companies. This Investment Guide for USA small cap stocks will help you navigate between the peculiarities of the Russell 2000®, MSCI USA Small Cap, S&P SmallCap 600 and the ETFs tracking them. It will allow you to find the most suitable small cap USA ETFs for you by ranking them according to your preferences.

The best USA Small Cap ETF by 1-year fund return as of 31.10.24

All USA small cap ETFs ranked by fund return

The largest USA Small Cap ETF by fund size in EUR

All USA small cap ETFs ranked by fund size

The cheapest USA Small Cap ETF by total expense ratio

All USA small cap ETFs ranked by total expense ratio

Methodologies of the most important indices

Source: justETF Research; As of 31/01/2020

Russell 2000® index

The Russell 2000® index tracks appr. 2,000 of the smallest companies (as measured by total market cap) from the underlying Russell 3000® index, which consists of the largest 3,000 US companies. The Russell 2000® index represents appr. 10 percent of the total market capitalization of the Russell 3000® index. The stocks passing the selection screen are weighted by their free float market capitalization.

Methodology of the Russell 2000® Factsheet Methodology

• Appr. 2000 small cap stocks from the United States
• Index rebalancing takes place annually. Exception: additions due to new IPOs, which take place quarterly
• Underlying index has requirements for inclusion such as minimum market cap, closing price, free float, location of trading of the majority of a company's shares
• Stock selection is based on total market cap
• Selection criteria: appr. 2,000 smallest stocks from the Russell 3000® index are included
• Index weighted by free float market cap

S&P SmallCap 600 index

The S&P SmallCap 600 index includes 600 small cap US stocks from the underlying S&P 1500® Composite index. Companies must have an unadjusted market cap of 600 million to 2.4 billion USD to be included in the index. The stocks passing the selection screen are weighted by their free float market capitalization.

Methodology of the S&P SmallCap 600 Factsheet Methodology

• 600 small cap stocks from the United States
• Index rebalancing takes place quarterly
• Index has minimum liquidity, free float and financial viability (positive earnings in the last year and quarter) inclusion criteria
• Selection criteria: 600 smallest companies from the underlying S&P 1500® Composite index with an unadjusted market cap of 600 million to 2.4 billion USD
• Index weighted by free float market cap

When choosing a USA small cap ETF one should consider several other factors in addition to the methodology of the underlying index and performance of an ETF. For better comparison, you will find a list of all USA small cap ETFs with details on size, cost, age, income, domicile and replication method ranked by fund size.

Compare all USA small cap ETFs in detail
Compare all USA small cap ETFs in a chart

Source: justETF.com; As of 20.11.24

Return comparison of all Small Cap ETFs on US equities

The table shows the returns of all USA small cap ETFs in comparison. All return figures are including dividends as of month end. Besides the return the reference date on which you conduct the comparison is important. In order to find the best ETFs, you can also perform a chart comparison.

• Cumulative
• Calendar year

Source: justETF.com; As of 31.10.24; Calculations in EUR including dividends