Published on 5 Jan 2022 on Zacks via Yahoo Finance

5 Small-Cap ETFs to Profit From the January Effect

After registering double-digit annual growth, Wall Street is poised to gain from the historical trend of “January Effect.” While large caps tend to perform better, small-cap securities have historically proven their outperformance in January (read: Best Performing ETFs of 2021).For investors seeking to capitalize on this opportunity, small-cap ETFs like iShares Core S&P Small-Cap ETF IJR¸ Vanguard Small-Cap ETF VB, Schwab U.S. Small-Cap ETF SCHA, Vanguard Small Cap Growth ETF VBK and iShares Russell 2000 Growth ETF IWO could be solid pure plays. All these have a solid Zacks Rank #2 (Buy).

What is January Effect?

January Effect is a seasonal increase in stock prices due largely to year-end tax considerations. Investors redeploy their capital to speculate on weaker performers in January after selling winners in December to create tax losses. This phenomenon pushes the stock market higher in the first month of the year.According to some market experts, the January Effect actually runs from mid-December through February, with small caps continuing to outperform their large-cap cousins.