Understanding the Russell Microcap Index ETF

The Russell Microcap Index ETF is a popular investment option for those looking to diversify their portfolio. It tracks the performance of the Russell Microcap Index, which is designed to measure the performance of the smallest publicly traded companies in the US.

The Russell Microcap Index is composed of approximately 1,000 publicly traded companies with a market capitalization of $200 million or less. These companies are often small-cap stocks that are not as well-known as larger companies.

Investing in the Russell Microcap Index ETF can provide a way to gain exposure to these smaller companies, which can potentially offer higher returns than larger companies. However, it's essential to remember that smaller companies can also be riskier and more volatile.

The Russell Microcap Index ETF is designed to be a low-cost, long-term investment option, with many funds offering an expense ratio of around 0.19%. This means that for every $100 invested, you'll pay just $0.19 in fees each year.

The Russell Microcap Index is a valuable tool for examining trends in smaller, startup companies known as micro-caps. It's reconstituted annually to reflect new and growing equities.

The index represents just a small fraction of the overall U.S. equity market by capitalization. As of October 2020, the index's stock with the market cap was $2.89 billion, with a median stock value of just $256 million.

The top 10 index constituents as of that time were as follows:

The Microcap Index is a valuable tool for examining trends in smaller, startup companies known as micro-caps. It's completely reconstituted annually to ensure new and growing equities are reflected and companies continue to reflect appropriate capitalization and value characteristics.

The current index's top five sector weightings are financial services, healthcare, consumer discretionary, producer durables, and technology. Healthcare names make up four of its 10 largest holdings.

The Microcap Index represents just a small fraction of the overall U.S. equity market by capitalization. As of October 2020, the index's stock with the market cap was $2.89 billion, with a median stock value of just $256 million.

The index consists of the smallest 1,000 securities in the small-cap Russell 2000 Index, plus the next 1,000 smallest eligible securities based on a combination of their market capitalization and current index membership weight. Over-the-counter (OTC) stocks and pink sheet securities are excluded.

The top 10 index constituents as of October 2020 were Overstock Com Inc (consumer discretionary), Digital Turbine Inc (consumer discretionary), Sorrento Therapeutics (healthcare), Workhorse Group Inc (industrials), Vivint Solar Inc (consumer discretionary), Kura Oncology Inc (healthcare), Cryoport Inc (industrials), Owens & Minor Inc (healthcare), Maxar Technologies Inc (industrials), and Seres Therapeutics Inc (healthcare).

Here are the top 5 sector weightings of the Microcap Index:

The Russell Microcap Index has two other related indices: the Microcap Growth Index and the Microcap Value Index. These indices measure the performance of the microcap growth and value segments of the U.S. equity market, respectively.

The Russell 2000 Index is a great place to start for those looking to invest in small-cap stocks. It tracks approximately 2,000 of the smallest companies in the US, selected from the Russell 3000 Index.

These companies are chosen based on their total market capitalization, with the Russell 2000 Index representing around 10% of the total market capitalization of the Russell 3000 Index.

The stocks included in the Russell 2000 Index are weighted by their free float market capitalization, which means the larger companies have a greater influence on the index's performance.

Here's a comparison of the Russell 2000 Index with other small-cap indices:

Note that the Russell 2000 Index is rebalanced annually, which means the composition of the index is reviewed and updated once a year to ensure it remains representative of the small-cap market.

The S&P SmallCap 600 index includes 600 small cap US stocks from the underlying S&P 1500 Composite index. These companies must have an unadjusted market cap of 600 million to 2.4 billion USD.

The index has a quarterly rebalancing schedule, ensuring that the composition of the index is regularly updated. This is done to maintain the index's integrity and reflect changes in the market.

Companies must meet certain criteria to be included in the index, including minimum liquidity, free float, and financial viability. This means they must have positive earnings in the last year and quarter.

The selection process involves choosing the 600 smallest companies from the underlying S&P 1500 Composite index. This is based on their unadjusted market capitalization.

The index is weighted by free float market capitalization, which means that the larger companies have a greater impact on the index's performance.

The Russell Microcap Index ETF has a methodology that's worth understanding. The index tracks the performance of approximately 1,000 to 3,000 small-cap US stocks.

The index is rebalanced annually, with quarterly rebalancing for new IPOs. This means that the index is adjusted once a year to reflect changes in the market, with additional adjustments made quarterly to account for new companies entering the market.

The underlying index has requirements for inclusion, such as a minimum market cap, closing price, free float, and location of trading of the majority of a company's shares.

The iShares Microcap ETF (IWC) tracks the Russell Microcap Index using a market capitalization weighting methodology.

Here are some key facts about the IWC ETF:

The ETF is broken down into various sectors, with the top sectors being Finance and Health Technology.

When looking at the distribution schedule for the Russell Microcap Index ETF, you'll notice a table that outlines the record date, ex-date, and payable date. The record date is the date by which you need to own the ETF to receive the distribution.

The distribution schedule also breaks down the total distribution into income, short-term capital gains, long-term capital gains, and return of capital. For example, in the last month's ETF flows section, we can see the total distribution, income, short-term capital gains, long-term capital gains, and return of capital for the ETF.

The fees associated with the Russell Microcap Index ETF are also relatively low, with a management fee of 0.60%. This fee is broken down into three categories: management fee, acquired fund fees and expenses, and other expenses. The expense ratio, which includes all of these fees, is also 0.60%.

Distributions are a crucial part of investing in ETFs, and understanding how they work can help you make informed decisions.

The record date is typically the date when a company determines which shareholders are eligible to receive a distribution. This date is usually set by the ETF provider.

The ex-date, or ex-distribution date, is the date when the distribution is no longer included in the ETF's net asset value. This date is usually one business day before the record date.

The payable date is the date when the distribution is actually paid to the shareholders. This date is usually set by the ETF provider.

Here's a breakdown of the different components of a distribution:

The distribution details can vary from one ETF to another, but understanding these components can help you make informed decisions about your investments.

The fees associated with the Fund are an important consideration for investors. The Management Fee is a key expense, currently standing at 0.60%.

The Fund's expense structure is relatively simple, with Acquired Fund Fees and Expenses and Other Expenses both being 0.00%.

The total expense ratio of the Fund is also 0.60%, which is a straightforward calculation of the Management Fee. Amounts are rounded to the nearest basis point, which can result in a "0.00" in some cases.

Here is a breakdown of the Fund's fees:

The amounts listed above are current and based on the prospectus, but may not reflect extraordinary expenses incurred by the Fund in the past fiscal year.