3 Microcap ETFs To Buy For The January Effect

PowerShares Zacks Micro Cap Fund (NYSEARCA:PZI)

This fund seeks to outperform passive benchmark micro-cap indexes and other actively managed U.S. micro-cap strategies by tracking the Zacks Micro Cap Index. The ETF has amassed $57.6 million in its asset base while sees light volume, probably increasing the total cost beyond the expense ratio of 0.93%.

Holding 400 stocks in its basket, the product is well balanced across each security as none of them take up more than 0.5% of assets. However, the financials sector takes the largest share in terms of sector at nearly 31% share while industrials, consumer discretionary and information technology round off to top four with double-digit allocation (read: 3 Financial ETFs to Watch on Volcker Rule Implementation). The fund has a definite tilt toward value stocks and is up over 44% for 2013.

Wilshire Micro Cap ETF (NYSEARCA:WMCR)

This product is the low cost choice in the micro-cap space, charging just 50 bps in fees and expenses. It is unpopular and illiquid having accumulated just $45.6 million in its asset base while trades in paltry volume. The fund follows Wilshire US Micro-Cap Index and holds 953 securities with a nice mix of blend, value and growth stocks.

Here again, financials take the top spot at 28.5%, followed by healthcare (19.68%), information technology (14.17%) and consumer discretionary (13.38%). In terms of holdings, each security holds less than 0.61% of total assets. The ETF returned 45.6% in 2013.

Bottom Line

January is truly the time to get in on micro cap securities, assuming that the historical trend holds true in 2014. Further, a booming stock market and an improving economy has boosted the appeal of these pint-sized funds that present growth opportunities to play the January Effect.

This article is brought to you courtesy of Eric Dutram.

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