Diversification is crucial in investing, and particularly at the right time, adding exposure to small-cap names can be beneficial to one's portfolio. Small-caps tend to see higher earnings and sales growth than larger names, as well as higher volatility (which is positive when the market sees an upswing). Right now we are seeing a divergence between small and large-cap valuations and prices, where small-caps are trading sideways and large-caps are moving higher amid strong earnings and a flight to safety from investors.
On a long timeframe, small, mid, and large-cap stocks tend to move in tandem with each other, and we feel that the upwards move from large-caps will eventually flow into and benefit smaller names. This leaves an opportunity for small-caps currently. Smaller companies are also trading at cheap multiples right now, with the S&P 600 small-cap index trading at valuation levels last seen in 2009.
The XSU ETF has an AUM of $418.3M, an MER of 0.36%, and a distribution yield of 1.69%. For exposure to US small-caps, we would be quite comfortable with XSU.