Unleashing the Potential of Small Cap Investing: A New Strategy for Extreme Investors
As we enter the third year of the bull market in big cap stocks, frustrated small cap investors are seeking out new opportunities for growth. The S&P 500 hit a historic high last week, marking a 63% increase since bottoming out in October 2022. However, the small-cap Russell 2000 tells a different story, only rising by 35% from its low in October 2023 and still shy of its November 2021 high.
At Extreme Investor Network, we understand the challenges faced by small cap investors and the desire for profitability in their portfolios. While historical data suggests that small caps outperform large caps over time, recent trends have shown the opposite. This shift has led investors to explore alternative strategies beyond traditional market capitalization-based investments.
One emerging trend is the embrace of ETFs that focus on profitable companies, excluding unprofitable ones. These funds have garnered significant inflows as investors seek stability and growth in their portfolios. By incorporating a profitability tilt, investors can mitigate the risks associated with unprofitable companies and potentially enhance their returns.
For instance, the SPDR S&P Small Cap 600 ETF (SPSM) screens for profitability and liquidity, outperforming the Russell 2000 in each of the past three years. State Street Global Advisors (SSGA), the fund’s manager, attributes this success to the profitability overlay, which has attracted a growing number of investors.
In addition to SPSM, other ETFs like the iShares Core S&P Small-Cap ETF (IJR) and the Dimensional U.S. Small Cap ETF (DFAS) offer similar profitability-focused strategies. These funds have seen strong inflows recently, signaling a shifting interest towards small cap investments with a profitability tilt.
At Extreme Investor Network, we believe in providing unique insights and strategies tailored to the needs of extreme investors. By staying ahead of market trends and offering innovative solutions, we empower our readers to make informed decisions and maximize their investment potential.
Join us at Extreme Investor Network to explore the exciting world of small cap investing with a profitability tilt. Let’s unlock new opportunities and unleash the potential of your portfolio together.