The Russell 2000 recent all-time high is proving that big things can come in small packages this holiday season. Given the index’s recent run, it’s an ideal time to get active exposure to funds like the Neuberger Berman Small-Mid Cap ETF (NBSM ).
Small cap companies can make amplified moves towards the upside, typically following an initial move by large caps. When the S&P 500 and Russell 2000 are juxtaposed in their year-to-date performance, their moves have been in lockstep with the former edging the latter out by about 7%.
If small cap caps do make a latent move higher, it could be in 2025. This would be when the new presidential administration takes office.
“Small-cap stocks are expected to benefit under president-elect Trump’s incoming administration and its preference for less regulation, which is viewed as positive for smaller companies as it will help them to better compete,” Tipranks reported.
Small cap companies an often be overlooked and that’s been the case the last 10 years. Much of the market hype has been centering on artificial intelligence (AI), which is benefiting large cap tech names.
“Small cap equities have been out of favor relative to large caps for more than a decade,” wrote Raheel Siddiqui Raheel Siddiqui, Senior Investment Strategist at Neuberger Berman, noting that one of the reasons is due to the sector composition of small cap companies versus their large cap counterparts.
“Starting in 2014, we find, an investor who chose to underweight the staples, energy, financial and health care sectors while overweighting the technology and materials sectors would have mitigated much of the underperformance of small caps vs. large caps,” Siddiqui added.
Given this, small cap exposure via NBSM adds diversification to a core equities portfolio. Furthermore, NBSM also offers mid-cap exposure, which balances the soundness of large cap companies with the growth inherent in small caps. Creating a balance of mid- and small-cap companies can require keen analysis. Actively managed funds can offer than analysis.
The Active Advantage
NBSM is an ideal all-encompassing option that removes the guesswork. Individual investors don’t have to pore over reams of data in order to build a solid portfolio.
Of course, a prime benefit of active management is the flexibility it offers to investors. When markets are trending higher or lower, active managers can adjust the holdings of the fund.
NBSM accesses the pool of talent in Neuberger Berman’s active management team. Given that these companies have their own nuances, it’s important to have that market knowledge available.
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