Recently, investors were reminded that mega-cap equities aren’t always risk-proof. While NVIDIA’s stock has rebounded a bit since the sell-off on June 24, investors may be looking for alternative means for seeking long-term growth. Luckily, there are plenty of alternate opportunities in equities for investors seeking to diversify from large-caps. One such example is the T. Rowe Price Small-Mid Cap ETF (TMSL ). TMSL aims to draw out long-term capital growth by investing small and mid-sized companies, also referred to as SMIDcaps.
The fund is benchmarked to the Russell 2500 Index and has a net expense ratio of 0.55%. Like many T. Rowe Price ETFs, TMSL is an actively managed fund. TSML’s portfolio is constructed using a bottom-up fundamental analysis. Instead of focusing on the current market cycle, T. Rowe Price prioritizes the value of an individual company.
The fund scrutinizes assets using a wide variety of company metrics. These include relative valuation, return on capital, projected growth rates, and capital expenditure, among other factors.
Along with the benefits of diversifying long-term equity plays away from large-caps, SMID cap investing offers other potential perks. Namely, smaller companies may be more nimble and adaptable to the changing market environments with considerable long-term growth potential.
Benefits of Active Management with SMIDcaps
SMID cap investing may be inherently more risky than large-caps. However, T. Rowe Price’s management can help with that. TSML is an actively managed fund and, therefore, can pivot investment focus away from potentially risky results.
Additionally, fund flows illuminate how T. Rowe Price’s SMID strategy resonates with investors. In the last week alone, TSML has seen over $10 million in net flows. The fund has significantly outpaced the Russell 2500 benchmark in the past year and currently has over $120 million in assets under management.
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