I am no fan of small-cap investing. And I haven’t been for at least the past decade or so. That’s partly a market structure issue, and partly due to how the original small-cap ETF, the $64 billion iShares Russell 2000 ETF (IWM), has turned into a psedo-junkyard for highly indebted public companies.
It is estimated that 2 out of 5 stocks in that heavily populated index are vulnerable to sustained higher interest rates. That is, they need to roll over existing debt in the next few years, and much of that debt is currently at lower borrowing rates than they are likely to get this time around. For some of those 2,000 stocks, there’s a “going concern” issue.
