Looking for the next big thing in the stock market? These small businesses may be hidden between small caps as they remain often overlooked by investors. One way to expose itself to the entire market segment is to buy small ETFs.
Topics covered on this page:
What is a small ETF?
Small-Cap ETFs are exchange trade funds that invest in the smallest companies in the market through what is called small-scale capitalization or small-caps. Small-Cap ETFs offer an easy way to purchase Small-Cap’s “Haystack” rather than searching for high performance.
Small caps may sound small, but they are usually not that small. All outstanding shares generally amount between hundreds of millions and billions of dollars. However, it is small for the stock market. This could result in a market capitalization of $1 trillion.
Investors like small caps as they can provide higher potential returns than large caps, typically represented by the S&P 500 index. However, they are small and have little financial resources, so they are often more risky and volatile.
Due to these risks, it is better to leave investments in individual small stocks to more advanced investors. But even new investors can buy baskets of these companies through small ETFs and take advantage of the potential higher returns of undiscovered small caps.
Top performance small ETF
Bankrate selected its top funds based on the following criteria:
- US funds featured in small caps on ETF.com screeners
- Funding among top performers over the past five years
- Performance measured on May 30, 2025
Investco S&P SmallCap 600 Revenue ETF (RWJ)
The ETF is based on the S&P SmallCap 600 Revenue Weighted Index and reemphasizes S&P SmallCap 600 Index stocks through the company’s earnings.
- 2025 YTD Performance: -9.1%
- Historic Performance (5+ Years): 19.5%
- Cost Ratio: 0.39%
Avantis US Small Cap Value ETF (Avuv)
The fund focuses on small caps across the industry and has profitable metrics, particularly companies with operating cash flow and attractive ratings compared to book value.
- 2025 YTD Performance: -8.1%
- Historic Performance (5+ Years): 19.2%
- Cost Ratio: 0.25%
Investco S&P SmallCap 600 Pure Value ETF (RZV)
The fund is based on the S&P SmallCap 600 Pure Value Index and uses measurements such as price and return rate and book value to price ratio to select stocks that will score high value.
- 2025 YTD Performance: -11.0%
- Historic Performance (5+ Years): 18.2%
- Cost Ratio: 0.35%
Investco S&P SmallCap Values ​​with MomentumETF (XSVM)
This ETF tracks the high momentum index of the S&P 600. It consists of 120 strains with the highest scores in momentum and value coefficients.
- 2025 YTD Performance: -7.6%
- Historic Performance (5+ Years): 17.3%
- Cost Ratio: 0.37%
VictoryShares We Small Cap Volatility WTD ETF (CSA)
This index fund tracks the NASDAQ Victory US Small Cap 500 Volatility Weighted Index. The fund includes 500 largest profitable companies, below a $3 billion market capitalization, weighted based on volatility.
- 2025 YTD Performance: -11.4%
- Historic Performance (5+ Years): 16.0%
- Cost Ratio: 0.35%
Principal US Small Cap ETF (PSC)
This ETF focuses on small hats that are often obtained from high quality business, favorable prices and price momentum factors.
- 2025 YTD Performance: 0.1%
- Historic Performance (5+ Years): 14.7%
- Cost Ratio: 0.38%
Vanguard Small-Cap Value ETF (VBR)
This ETF tracks the performance of the CRSP US Small Cap Value Index. This is an index of small growth stocks.
- 2025 Performance: -3.9%
- Historic Performance (5+ Years): 14.6%
- Cost Ratio: 0.07%
Is Small-Cap ETF a good investment?
Investing in small ETFs can offer attractive returns as long as they are purchased at a sensible price, but there are some drawbacks to note.
Small ETFs allow you to purchase a diverse portfolio of small and medium-sized enterprises at relatively low cost. Also, there is no need for extensive research that can quickly add to your entire portfolio and promote exposure to small spaces by investing in individual companies. Small caps can produce higher returns as they grow and become bigger businesses. Many of the most successful companies today started out as small caps.
However, one drawback of investing in small ETFs is that as the most successful companies grow, they move from being considered small caps, and many of the funds are forced to sell them to stay in line with their investment goals. Also, you will not be protected if economic development has a negative impact on the small space, as it does not provide a wide variety with other funds. Smaller funds also tend to be more volatile than funds that can accommodate larger, more established companies.
(You can also check out the list of the best large and best Mid-Cap ETFs.)
Conclusion
Small ETFs are an attractive way to invest at low cost in some of the fastest growing companies in the market without the same risk as buying individual stocks. But like all investments in the stock market, it is not without risks and other drawbacks.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Furthermore, investors recommend that past investment products performance is not a guarantee of future price increases.