This Small-Cap Fund Offers Good Diversification and Plenty of Upside

Tech stocks and growth stocks are looking expensive these days as the market continually climbs to new records. For investors looking for more modestly priced investments, one exchange-traded fund (ETF) which could be a potentially good long-term option is the Roundhill Acquirers Deep Value ETF (NYSE Arca:DEEP).

The fund focuses on stocks which are deeply undervalued. It tracks the Acquirers Deep Value Index, which focuses on 100 small-cap stocks. These are stocks which have attractive valuation multiples and which possess a lot of potential upside in the long run.

Roundhill’s fund is rebalanced on a quarterly basis, which ensures investors don’t need to worry about the holdings becoming stale or outdated. With a gross expense ratio of 0.80%, the fund’s fees aren’t cheap but if the returns prove to be strong, that shouldn’t chip away too much into your overall returns.

There’s some good diversification in the fund as well, as no holding accounts for even 2% of the ETF’s overall weight. This means that even if there is volatility in an individual stock, its price changes alone won’t be enough to trigger a significant move in the ETF’s overall valuation.

Year to date, the fund is down 4% and it has underperformed the markets. But over the past five years, its total returns when including dividends are over 30%. For growth-oriented investors who want exposure to small-cap stocks which could yield good returns in the long run, the Deep Value fund is a solid option to consider and a potential way to diversify your portfolio.