Why Quality Management is so Important When Investing in Micro-Cap ETFs

Um, what I do want to focus on is when thinking about exposure for small cap or micro cap, you know, there's kind of this index idea, just own the market like we do with the S&P 500 or the Russell 1000, or are you going to screen away certain things?

Um and in my mind there's one product that jumps out ahead of the the others in this idea and that is the first trust Dow Jones select micro cap in that it has a number of quality screens that it does on this space of the market and as a result if you look through to the underlying of the portfolio it's much smaller number of holdings but really what I look at is over the last 12 months are these companies making money and you when you look at FDM 81% of the portfolio um companies inside the portfolio have positive net income over the past um 12 months whereas if you look at something like IWC 46% so over 50% of the companies in that um portfolio lost money last year um so there's clearly you know you're buying speculative it may jump in a market that's really beta driven you might get more opportunity that IWC but you are buying a lot of companies that are not going to be here in few years um and that's just the simple result of passive investing on that large of a universe of small micro cap names.

AVSC is pretty good.

It's at 73%.

So, and it's got an interesting overlay.

It owns a lot more securities than I FDM does, but I think just purely in this space, and I'll get a little bit more into it in mystery as I go along, but I like the screening methodology of FDM in this particular area.

Um, just from a standpoint of owning a little bit more quality names within the small micro cap