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Friday, February 18, 2011

U.S. Small Cap Blend ETF Rankings

In this article, we  start with our US Small Cap ETF rankings. We have already completed  large and medium cap ETFs and have derived a performance graph for the  ones we selected to potentially use in an ETF plan.

click to enlarge
In this article, we move on to small cap blend ETFs with the goal of providing the same ranking.
We rank and determine a cutoff based on trading volume for liquidity and lowtrading friction, then rank them based on their returns and assign a score. We start with a fuller list of small cap blend ETFs:
IWMiShares Russell 2000 Index
IJRiShares S&P SmallCap 600 Index
VBVanguard Small Cap ETF
IWCiShares Russell Microcap Index
SCHASchwab U.S. Small-Cap ETF
PRFZPowerShares FTSE RAFI US 1500
JKJiShares Morningstar Small Core
RWJRevenueShares Small Cap
PZIPowerShares Zacks Micro Cap
FYXFirst Trust Small Cap Core Alp
FDMFirst Trust Dow Jones Select M
SLYSPDR S&P 600 Small Cap ETF
WMCRWilshire Micro-Cap ETF
VTWOVanguard Russell 2000 Index ET
PJMPowerShares Dynamic Small Cap
EWRSRydex Russell 2000 Equal Weigh
VIOOVanguard S&P Small-Cap 600 Ind

We now apply trading volume data  for us to be able to reduce the number of ETFs that we examine. We want  to make sure we maximize liquidity and minimize trading friction. We  are going to draw the line at around 200,000 although we will let the  Schwab ETF squeak in just under the bar at around 190,000. This gives us  five ETFs.

TickerDescription5 Yr AR%3yr AR%1yr AR%
VBVanguard Small Cap ETF4.00%5.40%37.07%
IJRiShares S&P SmallCap 600 Idx2.83%4.37%35.61%
IWMiShares Russell 2000 Index2.26%3.50%29.63%
IWCiShares Russell Microcap Index-1.89%0.74%35.77%
SCHASchwab U.S. Small-Cap ETF0.00%0.00%32.36%

We will select the top three although VB and IJR seem to be head and shoulders above the rest of the bunch.

TickerProperty2004 2005 2006 2007 2008 2009 2010 2011
VBDraw Down(%)12.00 9.04 13.15 13.31 51.92 32.54 20.01 3.69
Return(%)15.29 7.10 15.50 0.96 (37.61)36.39 28.58 3.19
IJRDraw Down(%)11.07 10.94 13.98 14.44 48.42 33.34 19.29 3.58
Return(%)21.43 6.57 14.17 (1.47)(31.70)24.45 27.33 2.13
IWMDraw Down(%)14.41 12.16 14.14 13.90 49.44 32.90 20.09 4.23
Return(%)16.88 3.04 16.95 (2.73)(34.48)26.81 26.49 1.55

So VB and IJR are selected for Mid Cap Blend ETFs.

I have no positions in any stocks mentioned, but plan to initiate a long position in IWM over the next 10 days.

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