If you're interested in broad exposure to the Small Cap Growth segment of the US equity market, look no further than the Guggenheim S&P SmallCap 600 Pure Growth ETF (RZG), a passively managed exchange traded fund launched on 03/01/2006.
The fund is sponsored by Invesco Powershares. It has amassed assets over $280.07 M, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.
Why Small Cap Growth
Small cap companies have market capitalization below $2 billion. They usually have higher potential than large and mid cap companies with stocks but higher risk.
While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Additionally, growth stocks have a greater level of risk associated with them. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.35%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.48%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Healthcare sector--about 28.20% of the portfolio. Information Technology and Consumer Discretionary round out the top three.
Looking at individual holdings, Enanta Pharmaceuticals Inc (ENTA) accounts for about 1.81% of total assets, followed by Biotelemetry Inc (BEAT) and Qualys Inc (QLYS).
The top 10 holdings account for about 14.67% of total assets under management.
Performance and Risk
RZG seeks to match the performance of the S&P SmallCap 600 Pure Growth Index before fees and expenses. The S&P SmallCap 600 Pure Growth Index is narrow in focus, containing only those S&P SmallCap 600 companies with strong growth characteristics as selected by Standard & Poors. As of December 31, 2010 the Index includes approximately 160 of the constituents that comprise the S&P SmallCap 600.
The ETF has gained about 6.50% so far this year and was up about 24.03% in the last one year (as of 05/21/2018). In the past 52-week period, it has traded between $99 and $121.77.
The ETF has a beta of 1.10 and standard deviation of 17.37% for the trailing three-year period, making it a high risk choice in the space. With about 142 holdings, it effectively diversifies company-specific risk.
Guggenheim S&P SmallCap 600 Pure Growth ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, RZG is a sufficient option for those seeking exposure to the Small Cap ETFs area of the market. Investors might also want to consider some other ETF options in the space.
The Vanguard Small-Cap Growth ETF (VBK) and the iShares Russell 2000 Growth ETF (IWO) track a similar index. While Vanguard Small-Cap Growth ETF has $7.71 B in assets, iShares Russell 2000 Growth ETF has $10.17 B. VBK has an expense ratio of 0.07% and IWO charges 0.24%.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Qualys, Inc. (QLYS) : Free Stock Analysis Report
ISHARS-RS 2K GR (IWO): ETF Research Reports
GUGG-SP 600 PG (RZG): ETF Research Reports
VIPERS-SC GRWTH (VBK): ETF Research Reports
BioTelemetry, Inc. (BEAT) : Free Stock Analysis Report
Enanta Pharmaceuticals, Inc. (ENTA) : Free Stock Analysis Report
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