iShares Core S&P Small-Cap ETF (IJR) Outperforms both the Russell 2000 and the S&P 500!
Small-cap companies have high return potential, but also higher volatility. This ETF tracks the S&P Small Cap 600 Index, which includes small-cap companies that are profitable and have positive returns. Notably, IJR tracks the S&P U.S. Small Cap 600 Index, not the more customary Russell 2000.
Once again, IJR tracks the S&P Small Cap 600 and stringently selects entrants from 1,500 wide spectrum stocks. The first criterion is that every such component company must have had positive returns over the past four quarters. The second is the $850 million market cap threshold, which also eliminates micro-caps.
The index, and by default the IJR ETF, hence, consists of profitable smaller companies that generally provide better returns in a growth environment. That means a healthy GDP growth, emerging industry drivers, and credit accessibility and affordability. To better understand its outperformance, the annual price returns of IJR and SPX should match: The 600-stock small-cap index is more volatile but returns 2.3% more per year on average than the SPX.
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