Podcasts & Videos

Is It Time for Small Caps?

October 6, 2015
There’s nothing small about the potential of small caps. But how can you find the best opportunities and how can you mitigate the risks involved? Find out in our podcast.

You cannot invest directly in an index. Diversification does not eliminate the risk of experiencing investment losses. Hedging can help returns when a foreign currency depreciates against the U.S. dollar, but can hurt when the foreign currency appreciates against the U.S. dollar. Investments in currency involve additional special risks, such as credit risk and interest rate fluctuations.


Beta: Measure of the volatility of an index or investment relative to a benchmark. A reading of 1.00 indicates that the investment has moved in lockstep with the benchmark; a reading of -1.00 indicates that the investment has moved in the exact opposite direction of the benchmark.


ECB: European Central Bank


Quantitative Easing (QE): A government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital, in an effort to promote increased lending and liquidity.


ETF: Exchange-traded fund.


Hedge: Making an investment to mitigate the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract.


Active manager: Portfolio managers who run funds that attempt to outperform the market by selecting those securities they believe to be the best.


Russell 2000 Index: Measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 is a subset of the Russell 3000 Index, representing approximately 10% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership.


S&P 600 Index: Measures the small-cap segment of the U.S. equity market.


Volatility: A measure of the dispersion of actual returns around a particular average level.


Price-to-earnings (P/E) ratio: Share price divided by earnings per share. Lower numbers indicate an ability to access greater amounts of earnings per dollar invested.


Price-to-dividend (P/D) ratio: Refers to the index price divided by the trailing 12-month dividends.


Rebalance: An index is created by applying a certain set of selection and weighting rules at a certain frequency. WisdomTree rebalances, or reapplies its rules-based selection and weighting process, on an annual basis.


Market capitalization: Share price x number of shares outstanding. Firms with the highest values receive the highest weights in approaches designed to weight firms by market cap.


ECB: European Central Bank.


Quantitative easing (QE): A central bank monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.


Dividend yields: Refers to the trailing 12-month dividend yield. Dividends over the prior 12 months are added together and divided by the current share price. Higher values indicate more dividends are being generated per unit of share price.


Currency risk: A form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.

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Tripp Zimmerman, CFA
Director, Research
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Jeremy Schwartz, CFA
Global Head of Research
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