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Should IQ Chaikin U.S. Small Cap ETF (CSML) Be on Your Investing Radar?

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If you're interested in broad exposure to the Small Cap Blend segment of the US equity market, look no further than the IQ Chaikin U.S. Small Cap ETF (CSML), a passively managed exchange traded fund launched on 05/16/2017.

The fund is sponsored by Indexiq. It has amassed assets over $407.67 M, making it one of the larger ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

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.

Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

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 0.82%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 26.50% of the portfolio. Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Renewable Energy Group Inc (REGI) accounts for about 1.13% of total assets, followed by Liberty Tripadvisor Hdg-A (LTRPA) and Fossil Group Inc (FOSL).

The top 10 holdings account for about 8.29% of total assets under management.

Performance and Risk

CSML seeks to match the performance of the NASDAQ Chaikin Power US Small Cap Index before fees and expenses. The NASDAQ Chaikin Power US Small Cap Index is a rules-based, quantitative index designed to enhance the NASDAQ US 1500 Index, by selecting stocks with the highest Chaikin Power Gauge rating.

The ETF has lost about -15.22% so far this year and is down about -14.45% in the last one year (as of 12/12/2018). In the past 52-week period, it has traded between $23.63 and $29.80.

The ETF has a beta of 1.03 and standard deviation of 15.56% for the trailing three-year period. With about 210 holdings, it effectively diversifies company-specific risk.

Alternatives

IQ Chaikin U.S. Small Cap 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, CSML is a reasonable option for those seeking exposure to the Style Box - Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Core S&P Small-Cap ETF (IJR) and the iShares Russell 2000 ETF (IWM) track a similar index. While iShares Core S&P Small-Cap ETF has $39.90 B in assets, iShares Russell 2000 ETF has $42.41 B. IJR has an expense ratio of 0.07% and IWM charges 0.19%.

Bottom-Line

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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IQ-CHKN US SC (CSML): ETF Research Reports
 
ISHARS-R 2000 (IWM): ETF Research Reports
 
ISHARS-SP SC600 (IJR): ETF Research Reports
 
Fossil Group, Inc. (FOSL) : Free Stock Analysis Report
 
Renewable Energy Group, Inc. (REGI) : Free Stock Analysis Report
 
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