3 Small-Cap ETFs to Buy Before the Great Rotation Leaves Large Caps Behind

Core Viewpoint - The article discusses the ongoing shift in the stock market from large-cap stocks, particularly the "Magnificent Seven," to small-cap stocks, suggesting that investing in small-cap ETFs could yield significant gains as interest rates decline and earnings growth broadens beyond major tech companies [1]. Group 1: Market Trends - The stock market is experiencing a rotation where capital is moving from large-cap stocks to small-cap stocks, indicating a change in market conditions rather than a uniform market movement [1]. - Small-cap stocks are gaining attention due to broadening earnings growth and the expectation of falling interest rates, which are beneficial for their performance [1]. Group 2: Recommended Small-Cap ETFs - Vanguard Small-Cap Index Fund ETF (VB): This ETF has a low expense ratio of 0.03% and a 30-day SEC yield of 1.3%. It has increased nearly 7% year-to-date, outperforming many tech stock ETFs, with over 21% of its holdings in industrials [1]. - Avantis International Small Cap Value ETF (AVDV): AVDV has seen a remarkable gain of nearly 61% in the past year, primarily due to dollar weakness and declining international interest rates. It offers a 1.42% dividend yield with an expense ratio of 0.25% [1]. - Schwab Fundamental US Small Company ETF (FNDA): FNDA focuses on company fundamentals rather than market value, resulting in a year-to-date increase of 9.5% and a 19% rise over the past year. It has 897 holdings and yields 1.11% with a 0.25% expense ratio [1].