Why a stock picking approach to small caps may boost performance right now

Published On Oct 19, 2024, 11:00 AM

The shift towards actively managed strategies in small-cap investments could be beneficial for investors seeking to enhance their returns. Rob Harvey from Dimensional Fund Advisors emphasizes the importance of selecting profitable companies and avoiding laggards. The Russell 2000 index tracking small caps has seen over a 12% rise this year, compared to a 23% increase for the broader S&P 500. As investor sentiment favors small caps, actively managed products that filter out underperforming stocks are gaining popularity. Currently, the Dimensional U.S. Small Cap ETF is slightly underperforming relative to the Russell 2000 index.

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Given the growing investor interest in small-cap stocks and actively managed funds, especially those focusing on profitable companies, there's potential for the Dimensional U.S. Small Cap ETF to see an increase in demand. This could lead to upward price movement if the trend continues.

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