U.S. Micro-Cap Equity

U.S. micro-cap equity funds and ETFs are funds that own the smallest... U.S. micro-cap equity funds and ETFs are funds that own the smallest stocks in the fund universe. These tend to be stocks with market capitalizations less than US$300 million, although depending on the fund, that number can rise to US$500 million. These funds cover a wide range of sectors. However, in the U.S., these funds tend to be dominated by health care, information technology, and energy companies. Typically, these funds are actively managed. Investors gravitate to U.S. micro-caps because of the possibility of significantly greater returns than large- caps, mid-caps, and even small-caps. These stocks are often running in the pre-profitability phase and are often burning cash as they seek high levels of growth. Depending on its success, today’s micro-cap stock can be tomorrow’s small-cap (or even better). Fund managers that specialize in micro-caps attempt to discern which of the smallest companies on the market have the potential for explosive growth in the years ahead. These funds are only appropriate for the most aggressive investors. There is a significant risk of capital loss in these stocks, although a diversified portfolio of them does reduce the overall risk to an investor. Last Updated: 04/16/2024 View more View less

U.S. micro-cap equity funds and ETFs are funds that own the smallest stocks in the fund universe. These tend to be stocks with market capitalizations less than US$300 million, although depending on the... U.S. micro-cap equity funds and ETFs are funds that own the smallest stocks in the fund universe. These tend to be stocks with market capitalizations less than US$300 million, although depending on the fund, that number can rise to US$500 million. These funds cover a wide range of sectors. However, in the U.S., these funds tend to be dominated by health care, information technology, and energy companies. Typically, these funds are actively managed. Investors gravitate to U.S. micro-caps because of the possibility of significantly greater returns than large- caps, mid-caps, and even small-caps. These stocks are often running in the pre-profitability phase and are often burning cash as they seek high levels of growth. Depending on its success, today’s micro-cap stock can be tomorrow’s small-cap (or even better). Fund managers that specialize in micro-caps attempt to discern which of the smallest companies on the market have the potential for explosive growth in the years ahead. These funds are only appropriate for the most aggressive investors. There is a significant risk of capital loss in these stocks, although a diversified portfolio of them does reduce the overall risk to an investor. Last Updated: 04/16/2024 View more View less