Investors Can Target Small and Mid-Cap Stocks With This Surging ETF
If you’re looking for significant gains from stocks, you may want to consider investing in small and mid-cap stocks. With modest valuations, these types of stocks could have considerable upside in the long run.
One exchange-traded fund (ETF) on the TSX that targets these types of stocks is the iShares S&P/TSX Completion Index ETF (TSX:XMD). It holds around 150 stocks, and it’s centered heavily around materials, industrials, financials, and energy. Together, those sectors account for close to three-quarters of its entire portfolio. Its largest positions are in Fairfax Financial Holdings (TSX:FFH), RB Global (TSX:RBA)(NYSE:RBA), and Celestica (TSX:CLS)(NYSE:CLS). The vast majority of the stocks, however, individually account for less than 2% of the ETF’s portfolio, making this a well-diversified investment to hold.
The average holding in the ETF has a price-to-earnings multiple of less than 19, and a price-to-book ratio of two. On average, the stocks are reasonably valued and that can bode well for investors who want a good investment to hold on to today. With many stocks trading at elevated valuations, this ETF can provide a good balance.
The fund’s management expense ratio of 0.60% is in line with that of other, similar ETFs. It yields 1.4%, which can help give investors a way to pad their overall returns and generate some recurring income.
Since the start of the year, the ETF has risen by 20% and in five years it has climbed by more than 80%. While there is some risk with the fund given its exposure to small and mid-cap companies, it can be a great way to invest in up-and-coming stocks which possess a lot of growth potential.
