Getting Broad Exposure Outside the S&P 500

All right. Well, that takes us next to exposure strategy. This is where we break down what the funds actually do, what they hold, and so forth. So, Dave, you're still up. Break it down for us. How do these two funds compare?

IWM focuses on the Russell 2000, which is weighted by market cap. You're looking at stocks 1,000 through 30,000 roughly on the US stock market. VXF is tied to the S&P completion index, which basically invests in the entire US stock market outside of the S&P 500. You're going to be looking at stocks pretty much 501 through about 3,900 or 4,000. Because it starts right outside the S&P 500, VXF is going to have a slightly larger company tilt. You're going to get more midcap exposure. IWM is going to be a little more of a pure small cap play.

I'm going to throw out a wild card here. I'm going to mention the Vanguard S&P 600 ETF, VIO. As the name suggests, it's investing in stocks 900 through 1,500 in the S&P rankings. So, you've got a balance between VXF and IWM as far as the stocks that it targets. The one thing I like about VIO though is that it puts a quality screen on there. Companies that make that index have to have positive earnings.

So it screens out any of those zombie companies or any of those companies that are losing money. I think that's really important when you're investing in small caps. You want a fundamental quality tilt there to screen out some of the garbage. So I think that one's fundamentally better. Again, that's important when investing in small caps. So, I'm going to go with the wild card.