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10 Ways to Play the Explosive World of Small-Cap Stocks

By U.S. News & World Report

Even Apple started somewhere.

Small-cap stocks are the market’s powder kegs — tiny companies with market capitalizations between $300 million and $2 billion that have the potential to turn into the next Apple (ticker: AAPL) or Exxon Mobil Corp. (XOM). Investors love them because of the potential breakneck growth. The flip side: Many of these companies can crater when either their concepts don’t play out or economic downturns squeeze their limited resources too tight. Exchange-traded funds reduce that risk by allowing you to invest in baskets of stocks in a single purchase, leveraging that growth potential.

iShares Russell 2000 ETF (IWM)

The Russell 2000 is the most well-known and followed index tracking small-capitalization stocks, and the iShares Russell 2000 ETF, at $22 billion-plus in assets, is the most popular way to track it. IWM holds roughly 2,000 small-cap companies, with no single stock accounting for more than 0.4 percent of the fund. The fund leans most heavily on financials (26 percent) and tech (18 percent), with top holdings including sanitizer/decontamination firm Steris (STE) and self-storage company CubeSmart (CUBE).

Expenses: 0.2 percent, or $20 annually per $10,000 invested

Vanguard Small-Cap Growth ETF (VBK)

It would seem redundant to have a small-cap growth fund, but it’s important to remember that some companies are “growthier” than others, featuring better earnings prospects among other traits. The VBK invests in 740 of these companies, including Ionis Pharmaceuticals (IONS), Signature Bank (SBNY) and Waste Connections (WCN). The fund, like IWM, is heaviest in financials, with significant weights in health care, industrials and technology.

Expenses: 0.09 percent

Vanguard Small-Cap Value ETF (VBR)

Funnily enough, those “growthier” stocks haven’t been the better play in the small-cap space — value has won out over the past few years. Instead of looking for growth prospects, VBR holds companies with more favorable valuations, and that recipe has won out across several time periods, including roughly 15 percent gains over the past three years versus 10 percent for the VBK. VBR sells out even more to financials and industrials, with half the fund invested in those two sectors alone.

Expenses: 0.09 percent

Schwab International Small-Cap Equity ETF (SCHC)

U.S. small-cap companies tend to have little economic exposure to the rest of the world, instead getting most of their revenues from the U.S. Diversification is key to ride out weak periods in America. That’s where SCHC comes in. This Schwab fund provides exposure to the small-cap companies of developed-market countries, including Japan, the U.K. and Canada. Note: There are only 10 countries represented, so it’s not wide in geographic diversity. Top holdings include Irish bookmaker Paddy Power and Canadian dollar-store operator Dollarama.

Expenses: 0.18 percent

WisdomTree Emerging Market SmallCap Fund (DGS)

Well, if you’re going to swing, you should swing for the fences. If you want to target the companies that theoretically have the most growth potential, DGS allows you to invest in small caps in emerging-market countries. In other words, you’ve got companies with a lot of upside in economies that have a lot of upside. Like most emerging-market funds, DGS is overweight in a couple of countries — namely, Taiwan (29 percent) and China (15 percent) — among its 16 countries.

Expenses: 0.63 percent

PowerShares DWA Small Technical Leaders Portfolio (DWAS)

The DWAS puts a spin on small-cap investing by focusing not on fundamental factors but technical quality. DWAS holds 200 smaller companies that exhibit “powerful relative strength characteristics based on that company’s market performance.” In short, this fund jumps on hot-moving stocks and keeps trying to ride that momentum. Top holdings include U.S. Concrete (USCR), Cantel Medical Corp. (CMN) and FBL Financial Group (FFG).

Expenses: 0.6 percent

PowerShares S&P SmallCap Information Technology Portfolio (PSCT)

Tech is a major part of most small-cap funds, and for good reason: Smaller technology companies have all sorts of untapped growth potential that’s just waiting for mass adoption to send shares flying. The PSCT invests in those companies, with software, IT services and Internet among the industries represented in the fund. Top holdings include names like gamemaker Take-Two Interactive Software (TTWO) and payment processor Heartland Payment Systems (HPY).

Expenses: 0.29 percent

Sprott Junior Gold Miners ETF (SGDJ)

Whereas regular mining companies are those that actually operate mines, junior mining companies typically explore, detect and test deposits, then sell them to the majors. They’re riskier plays, but they also have explosive growth potential — and tend to do very well when the price of gold ticks higher. SGDJ, which invests in 35 junior minors such as Sibanye Gold (SBGL) and Detour Gold Corp., has done quite well amid gold’s 2016 surge, up 20 percent year-to-date against a down market.

Expenses: 0.57 percent

Direxion Daily Small Cap Bull/Bear 3X Shares (TNA/TZA)

To make the ultimate bet on small-cap stocks, consider TNA … and to make the ultimate bet against small-cap stocks, there’s TZA. TNA looks to return 300 percent of the daily return of the Russell 2000, making it an uber-leveraged long bet on the performance of small caps. TZA does the exact opposite, returning -300 percent of the index’s daily performance. Just be warned: These funds are only for quick swing trades, not for holding. And they move rapidly, with TNA already down 36 percent this year.

Expenses: 0.95 percent

More from U.S. News

9 Growth Funds That Will Turbocharge Your Portfolio

8 ETFs for Investors Who Love Value

Chinese ETFs: 9 Ways to Play the Middle Kingdom

10 Ways to Play the Explosive World of Small-Cap Stocks originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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