Small-Caps Are Stretched

The iShares Russell 2000 (IWM) was one of the first exchange-traded funds (ETFs). The Russell 2000 is an interesting index -- mutual fund managers like to use it as their benchmark since it is full of garbage and tends to underperform its cousin, the S&P Smallcap 600 index.

Two thousand stocks is a lot to have in an index. And if you think about the mechanics of ETF trading, whereas a market maker would have to hedge ETF positions with baskets of the illiquid underlying stock, all 2,000 names, it's not difficult to imagine that in the early days, liquidity for IWM was very poor....435 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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