The iShares S&P Small-Cap ETF (ASX: IJR) is one of the lowest-cost ASX ETFs on the market and provides both dividends and strong capital growth. Is it the perfect small-cap solution?
What Are Index Funds & ETFs?
Australian or ASX ETFs are investment funds which can be bought or sold on a stock exchange and provide exposure to a range of shares or assets with a single investment. The podcast episode below explains index funds, ETFs and managed funds in more detail.
What Is The iShares IJR ETF?
The iShares S&P Small-CAP ETF is an index-tracking ETF that aims to match the performance of the S&P Small-Cap 600 index. The companies in this index are selected for their liquidity, size and industry representation. Right now, the IJR ETF has positions in around 600 US companies, with the highest weighting given to any company only 0.66%.
These US companies are spread across industries, with around 18% industrials, 17.6% financials, and 15% information technology. Materials, energy and utilities all receive less than a 5% weighting each. So, diversification benefits should be quite high if paired with, say, an ASX 200 ETF.
The IJR ETF has fallen down on performance over the last year, losing 9.07%, but over the last 10 years, the average return (including dividends) has been 15.7% per year. Going back to inception in October 2007, IJR has returned 8.57% per year, which is fairly impressive given that includes the GFC.
IJR pays dividends quarterly, with the current 12-month trailing yield is 1.22%.
IJR Fees & Risks
The IJR ETF is very low cost, with a management fee of only 0.07% per year. In my opinion, this is one of the most attractive features of this ETF.
In terms of risks, small-cap shares tend to be more volatile than large-caps and can often suffer heavier losses in a downturn, although the diversification benefit from 600 holdings does reduce this volatility risk.
The IJR ETF should be considered high-risk and is likely to move a lot more than a standard S&P 500 ETF.
What I Think Of IJR
IJR is a low-cost index fund ETF which is well-diversified across industries, has a proven track record of meeting its benchmark over a long-time period and is large enough to provide liquidity. As a small-cap ETF, it should be considered higher risk, but it’s worth considering for long-term growth.
For our number one ETF pick, check out the free report below.
Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.