Best penny stock ETFs to buy in 2022

Penny stock ETFs are an easy way to gain exposure to a range of small companies. This beginner friendly guide picks five of the top penny stock ETFs for the year ahead.
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Updated: Oct 11, 2022
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Penny stock exchange traded funds invest in a selection of the cheapest publicly traded companies in the world. They cover a range of industries and geographies and can offer a way to diversify a portfolio. This page selects five of the best penny stock ETFs for this year. 

What are the top penny stock ETFs to buy?

Our investment experts have found five of the best penny stock ETFs to buy for 2022. Check out the table below which has their name and ticker symbol, or continue scrolling to learn more about each in detail.

#ETF symbolETF nameWhere to Trade
1IWCiShares Micro-Cap ETF
2FDMThe First Trust Dow Jones Select MicroCap Index Fund
3LOPXThe Direxion Low Priced Stock ETF
4DWMCAdvisorshares Dorsey Wright Micro-cap ETF
5DWAInvesco DWA SmallCap Momentum ETF
List chosen by our team of analysts, updated 21 July 2022

1. iShares Micro-Cap ETF (NYSEARCA: IWC)

IWC invests in some of the smallest companies within the United States. It tracks the performance of the Russell Microcap index and includes almost 1800 holdings. It is one of the largest penny stock ETFs and has over $1 billion invested. Since its inception it has performed well, especially during the pandemic when its price surged by more than 200%.

The fund takes first spot on our list because of its diverse holdings. It spreads its funds across many sectors, although almost half is focused on healthcare, financial services, and industrials. The healthcare sector is often a favourite for penny stock investors and nearly a quarter of IWC is invested in it. 

iShares may not be suitable for ESG investors however. It holds a number of companies that operate in sectors some investors may not agree with. Some of these include firearms, coal production, and tobacco. However, IWC gives its investors access to many of the best performing small US based companies.

2. The First Trust Dow Jones Select MicroCap Index Fund (NYSEARCA: FDM)

The First Trust Dow Jones Select MicroCap invests in small companies listed on the NYSE, NYSEAMEX, and NASDAQ. It aims to track the performance of the Dow Jones Select index. FDM uses a screening process to determine which stocks to invest in. This is based on market capitalisation, trading volume, and a number of financial datasets. 

There are over 200 holdings in the fund split across a broad range of sectors. However, almost two thirds of it is focused on financial services, industrials, and consumer discretionary. Its $170 million in total assets is fairly equally distributed across all of its holdings. 

Since its inception in 2005, it has been performing well. Although when lockdowns began in 2020, the funds value was cut in half. It later regained its losses and finished 2021 at its highest price yet. As FDM includes much fewer holdings than IWC above, it is less diverse, but offers greater opportunity for growth.  

3. The Direxion Low Priced Stock ETF (NYSEARCA: LOPX)

LOPX is the newest and smallest ETF on our list. It was created in July 2021 and includes just 50 stocks. It seeks to track the performance of The Solactive Two Bucks Index. As its name suggests, it invests in low priced stocks trading between $2 – $5. It includes companies globally, but the majority are U.S. based. 

The Direxion invests in four main sectors where over 75% of the fund resides: energy, healthcare, financial services, and consumer goods. Among its 50 holdings are a few well known stocks including AMC Entertainment, Moneygram, and Agenus. Its stocks are split based on certain criteria and its largest holding, AMC, makes up nearly 10% of the fund. 

In its short trading history it has experienced a difficult time. In the few months following its inception it lost 30% in value. As its largest holding falls into the meme stock category, LOPX can experience a lot of volatility and is best suited to investors willing to accept lots of ups and downs in price.

4. Advisorshares Dorsey Wright Micro-cap ETF  (NASDAQ: DWMC)

DWMC is an actively managed ETF that invests in micro-cap companies that have a market capitalisation of less than $1 billion. Unlike many ETFs that track the performance of a specific index, DWMC is run by an experienced portfolio manager who uses a strategy known as relative strength investing to decide what equities to buy and sell. 

The fund only invests in stocks that meet certain criteria which mainly involves analysing technical data. No company fundamental data is involved in the analysis. It has over 150 holdings spread across four main sectors including technology, healthcare, industrial, and consumer cyclical. 

Since its inception in 2018 its performance has been robust with gains of over 60% in that time. The Advisorshares offers a different approach to penny stock ETF investing as it doesn’t just simply invest in hundreds of stocks, but offers a more methodical approach. 

5. Invesco DWA SmallCap Momentum ETF (NASDAQ: DWA)

Last place on our list goes to the Invesco DWA SmallCap Momentum ETF. It tracks the performance of the Dorsey Wright SmallCap Technical Leaders index and invests in a mix of small cap and micro cap companies. It includes both growth and value stocks and has over 200 holdings. 

The fund has more than $500 million in total assets and is spread across multiple industries. However almost 75% of it belongs to the financial, healthcare, industrial, consumer, and energy sectors. Its weighting to each stock is mostly equal meaning no single company can impact its price. 

Since its inception in 2012 it has been a strong performer and has grown by over 300% in that time. It also pays a quarterly dividend to investors. Its long standing historical growth makes it a suitable ETF for investors looking for some stability in the penny stock sector. 

Where to buy the best penny stock ETFs

If you want to invest in a penny stock ETF you’ll find it easiest to use an online broker. Our investment experts have selected the top brokers around for ETF investing which you can find in the table below. Click on any of the links to get started in just a few minutes.

1
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Deposit with ACA, Wire, Pay with my bank
Invest for dividends and get payout on stocks on Ex-Dividend day
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Payment Methods:
Bank Transfer, Credit Card, Debit Card, PayPal, Wire Transfer
Full Regulations:
CySEC, FCA
Investoo Ltd is compensated if you access certain of the products or services offered by eToro USA LLC and/or eToro USA Securities Inc., as applicable. This compensation incentivizes Investoo Ltd to describe those products and services in favorable terms. Any testimonials contained in this communication may not be representative of the experience of other eToro customers and such testimonials are not guarantees of future performance or success.
2
Min. Deposit
$ 100
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10
Trade out-of-hours on over 70+ US stocks
Get exposure to a wide range of popular UK, US and international stocks
Enjoy flexible access to more than 17,000 global markets, with reliable execution
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Payment Methods:
Bank Transfer, Credit Card, Debit Card, PayPal
Full Regulations:
ASIC, FCA, FINMA, is a licensed bank (IG Bank in Switzerland)
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
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What is a penny stock ETF?

It’s an exchange traded fund that invests only in companies often referred to as penny stocks. ETFs are investment funds that are available to buy on the stock market. You are able to buy shares in an ETF through a stock broker. Each fund usually tracks the performance of a specific sector or index. 

Penny stock ETFs give investors exposure to some of the smallest and riskiest companies without having to buy individual stocks. They are an easy way to get exposure to a broad range of companies that have very low valuations. Penny stocks are inherently risky, however ETFs containing them, allow you to spread your risk and diversify your portfolio. 

Are penny stock ETFs a good investment?

Yes they can be, but you need to consider the risks involved. Penny stocks are high risk, high reward options, so it’s not a good idea to put all of your money into them. Penny stock ETFs can make investing into the sector much easier as you’ll be able to invest in the best companies without having to research each individually. 

Some of the biggest companies today were once penny stocks, so they can make a good addition to a portfolio. One thing to take into consideration is the amount of holdings a specific ETF has. An ETF with thousands of investments will move much slower than one with just a few, although will offer more stability. Read more: best ETFs to invest in

Before buying an ETF you’ll need to register with a broker and keep up to date with the latest news and developments. Both of which you can do by clicking on the links below.

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Prash Raval
Financial Writer
When not researching stocks or trading, Prash can be found either on the golf course, walking his dog or teaching his son how to kick a… read more.