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Should iShares Morningstar Small-Cap ETF (JKJ) Be on Your Investing Radar?

Sweta Killa
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Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the iShares Morningstar Small-Cap ETF (JKJ) is a passively managed exchange traded fund launched on 06/28/2004.

The fund is sponsored by Blackrock. It has amassed assets over $215.16 M, making it one of the average sized 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 0.25%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.48%.

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 Financials sector--about 19% of the portfolio. Industrials and Real Estate round out the top three.

Looking at individual holdings, Ciena Corp (CIEN) accounts for about 0.83% of total assets, followed by Oshkosh Corp (OSK) and Caseys General Stores Inc (CASY).

The top 10 holdings account for about 7.18% of total assets under management.

Performance and Risk

JKJ seeks to match the performance of the Morningstar Small Core Index before fees and expenses. The Morningstar Small Core Index measures the performance of stocks issued by small-capitalization companies.

The ETF return is roughly 7.94% so far this year and is down about -10.72% in the last one year (as of 01/24/2019). In the past 52-week period, it has traded between $139.81 and $186.23.

The ETF has a beta of 1.07 and standard deviation of 14.49% for the trailing three-year period, making it a medium risk choice in the space. With about 280 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Morningstar 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, JKJ is a sufficient 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 $40.83 B in assets, iShares Russell 2000 ETF has $41.09 B. IJR has an expense ratio of 0.07% and IWM charges 0.19%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they 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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Ciena Corporation (CIEN) : Free Stock Analysis Report
 
iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports
 
iShares Russell 2000 ETF (IWM): ETF Research Reports
 
Caseys General Stores, Inc. (CASY) : Free Stock Analysis Report
 
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