Small Cap Quality

Name: Small Cap Quality
Brand: Interactive Advisors
Price: 100.00 USD
Availability: InStock

IA Smart Beta

The Small Cap Quality portfolio offers investors focused exposure to smaller U.S. companies that stand out for their strong financial health. Rather than simply tracking a traditional market-cap-weighted index, this portfolio applies a disciplined, factor-driven selection process to identify businesses with attractive quality traits, such as sound earnings and efficient operations. The result is a diversified collection of holdings designed to capture the growth potential often found among smaller companies while maintaining a structured approach to managing risk. This strategy is offered at a relatively low cost, making it an accessible way to pursue quality-oriented investing in the small-cap space.

Portfolio insights

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Quality at the core: This portfolio focuses on small-cap companies with measurable financial strength, emphasizing metrics like return on assets and earnings consistency. The selection process prioritizes fundamental quality characteristics over short-term price momentum, targeting companies with sound business models.
Broad, balanced exposure: Rather than concentrating in a handful of names or sectors, the portfolio spreads investments across approximately 300 holdings with built-in volatility controls. This broad structure helps manage the sharper price swings that smaller stocks can experience.
Systematic investment process: Every decision, from stock selection to rebalancing, follows clearly defined criteria applied quarterly. This disciplined approach removes emotional bias and keeps the portfolio aligned with its quality-focused mandate through varying market conditions.

Investment suitability

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Quality-focused small-cap investors: This portfolio suits investors who want exposure to smaller U.S. companies with strong fundamentals but prefer a quality filter that screens for financially sound businesses rather than chasing high-growth or speculative names.
Discipline-driven investors: If you value a consistent, repeatable process over subjective stock picking, this portfolio provides a transparent framework where predetermined quality standards guide every investment decision, giving you clarity into how and why holdings are selected.
Risk-aware diversifiers: Investors who want broad small-cap market access and understand the inherent volatility of smaller companies without excessive concentration will appreciate the portfolio's layered risk controls, including volatility limits and sector caps that work together to manage downside exposure.

Methodology

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Research: The portfolio construction process draws on academic research into factor-based investing, which studies how specific financial characteristics can influence long-term returns. Interactive Advisors has conducted extensive research and back-testing to identify the quality-focused factors and rules that guide this portfolio. The goal is to deliver a risk-return profile that may be more attractive than a traditional market-cap-weighted index such as the Russell 2000.
Approach: This portfolio follows a structured, rules-based process guided by a quantitative framework that evaluates each stock against defined quality criteria. It is rebalanced quarterly, ensuring that holdings are regularly reviewed and that companies exhibiting the most attractive quality characteristics have a greater likelihood of inclusion. This disciplined method removes emotional decision-making and keeps the investment process consistent over time.
Allocation discipline: The portfolio targets approximately 300 individual stock positions, providing broad diversification across the small-cap universe. Stocks with stronger quality metrics, such as higher return on assets and solid earnings quality, receive larger allocations. As a risk management measure, the construction process limits exposure to highly volatile stocks and avoids heavy concentration in any single market sector, helping to keep the portfolio balanced.
Sell discipline: Sell decisions follow the same disciplined, rules-based process that governs the rest of the portfolio. During each quarterly rebalance, stocks that no longer meet the quality criteria are replaced by those with more favorable characteristics. This consistent process helps ensure the portfolio remains aligned with its quality-focused investment mandate.
Exceptions: Positions in stocks undergoing corporate actions may be sold or adjusted outside the regular rebalance schedule. Performance calculations reflect the then-applicable management fee rate, which was updated from 0.08% to 0.20% as of March 1, 2024.

Strategy

Smart Beta

Inception

Dec 22, 2016

Annualized return (inception)

6.30%

Portfolio risk score

Learn more

Capital growth plus with a more complex portfolio or higher risk profile than broad equity markets. Investing in equities and concentrated portfolios and prepared to accept fluctuation in portfolio value.

Management fee

0.20%

Minimum investment

$100

Investment (below min)

Annual costs

Performance Chart

Metrics

Last 30 days	0.5%
Last 90 days	2.1%
Last 365 days	10.8%
Last 5 years	17.1%
Since inception (Dec 22, 2016)	78.2%
Since inception (annualized)	6.3%
2026 (YTD)	4.7%
2025	1.3%
2024	9.5%
2023	9.2%
2022	-14.6%
2021	28.5%
2020	4.3%
2019	22.2%
2018	-9.5%
2017	11.7%

Volatility	16.4%
Sharpe ratio	0.49
Sortino ratio	0.83
Maximum drawdown Shows the largest percentage drop in portfolio value from a peak to a subsequent low point over a specific time period, representing your worst-case scenario loss had you invested at the worst possible time and held through the decline. However, this metric is incomplete because it only shows the single worst loss without revealing how often other drawdowns occurred, their frequency, how long losses took to recover, or whether the portfolio ever fully recovered at all.	-9.1%
Value-at-risk (95%, 1 week)	-3.8%

Manager

Interactive Advisors is an established name in the field of online investing, with a history of path-breaking work. The platform offers a variety of portfolios, including the Smart Beta portfolios, which are managed by Interactive Advisors's Chief Investment Officer and Investment Management team.

The “Smart Beta” approach to portfolio construction is grounded in academic research. The goal of this strategy is to achieve an alternative risk-return profile which is more attractive than a simple capitalization-weighted index such as the S&P 500.

Interactive Advisors Smart Beta portfolios follow rules-based investment strategies designed to provide systematic exposure to a fundamental factor or combination of factors.

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Disclosures

Past performance is no guarantee of future results, and all investments, including those in this portfolio, involve the risk of loss, including loss of principal and a reduction in earnings.

This portfolio was launched on Interactive Advisors on December 22, 2016. On that date, Interactive Advisors started trading its own funds in a brokerage account trading this strategy. This portfolio was opened to client investments on December 22, 2016. All performance information on this page is actual performance of the Interactive Advisors proprietary account and presented “net of fees”. The actual performance chart is provided for informational purposes only, and should not be used as the basis for making an investment decision. Actual client returns will differ.

The ESG variants of the Smart Beta and Asset Allocation Portfolios and the Socially Responsible Investing portfolios use an Environmental, Social and Governance (“ESG”) investment strategy. Such a strategy could limit the types and number of investment opportunities available to this portfolio, lead the portfolio to underperform a portfolio without an ESG focus or with a distinct ESG focus, and result in the portfolio investing in securities or industry sectors that underperform the market as a whole or foregoing opportunities to invest in securities that might otherwise be advantageous to invest in. Interactive Advisors could also be unsuccessful in creating a portfolio investing in stocks of companies or ETFs made up of companies that exhibit positive or favorable ESG characteristics and the ETF manager (or the provider of the index the ETF seeks to track) may not succeed in selecting issuers that exhibit positive or favorable ESG characteristics in constructing the ETFs.

Additional information on the risks, conflicts of interest, applicable brokerage commissions, fractional shares, and limitations on investments and divestments associated with this portfolio can be found here and on the Forms and Agreements page.

Important information

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The actual performance of the manager account displayed on this page is based on the performance of an Interactive Advisors proprietary account invested using this strategy and is calculated by Interactive Advisors on a daily time-weighted basis, including cash, dividends and earnings distributions. The actual performance for this portfolio is presented “net of fees” and reflects the deduction of the Interactive Advisors advisory fee, Interactive Brokers LLC brokerage and other commissions (when commissions were charged) and expenses that a client has to pay if he invests in this portfolio after the launch date, but not any fees clients must separately pay the issuers of any ETFs.
We rely on mathematical formulas, computer programs, and pricing information from third-party vendors (e.g., Refinitiv Worldscope database) to provide these returns. Neither Interactive Advisors nor any of its data or content providers shall be liable for any errors in this information or any actions taken by you in reliance upon this information.
None of the performance information displayed on this page is based on the actual performance of any Interactive Advisors client account investing in this portfolio. The performance in an Interactive Advisors client account invested in this portfolio may differ (i.e., be lower or higher) from the performance of the account managing this portfolio and portrayed on this page based on a variety of factors, such as trading restrictions imposed by the client (resulting in different account holdings), time of initial investment, amount of investment, frequency and size of cash flows in and out of the client account, applicable brokerage commissions (when commissions were charged), and different corporate actions. Clients investing in this portfolio may view the actual performance of their investment in this portfolio by logging into their Interactive Advisors account and reviewing their customized dashboard.
Not all transactions underlying the performance information displayed on this page will appear in accounts due to Interactive Advisors’ trading rules and individual client constraints. Eligibility of these securities is monitored periodically, and may change over time. Actual client investment holdings may vary.
Clients may restrict any of the securities traded in their account, but should note that any restrictions they place on their investments could affect the performance of their account leading it to perform differently, worse or better, than (a) the above-portrayed account managing the portfolio or (b) other client accounts invested in the same portfolio.
All graph data is as of the end of day for the referenced period, unless otherwise specified. The investment minimum is the minimum investment required to follow a particular portfolio. The minimum amount is determined by Interactive Advisors, based on the characteristics of the underlying portfolio. It should not be considered as specific investment advice for your investment situation.
Interactive Advisors’ management of this portfolio and some of the information on this page relies on data from third-party sources, including third parties providing the model portfolio strategy or ESG score information, as applicable. While Interactive Advisors believes that the data it uses in its investment management processes is obtained from reliable sources, it did not audit or validate this data, which may contain errors.
Benchmark returns displayed in the performance graph upon selection are provided for illustrative purposes only and have been calculated by Interactive Advisors using daily adjusted close prices and include dividend income. Benchmarks available for display are selected based on overall strategy, trade history and other criteria. If you choose to display benchmark returns in the performance graph, be mindful of the fact that the performance, composition and volatility of the portfolio could vary significantly from that of the benchmark(s) available for display. There can be no assurance that a benchmark will remain appropriate over time and Interactive Advisors will periodically review the benchmark’s appropriateness and decide to use other benchmarks if appropriate. More information here. Interactive Advisors uses only investable ETFs as benchmarks. Investable ETF returns reflect the deduction of (i.e., are net of) management fees, transaction costs and expenses.
Transaction history is available upon request. Portfolio classifications are provided by Interactive Advisors, and are intended to serve as a general guide.
In addition to Interactive Advisors' management fees, clients will also be charged management fees and other expenses (custodian fees, brokerage commissions, and legal and accounting fees) by ETF issuers if the portfolio contains ETFs.
Quarterly, monthly or more frequent rebalances in this portfolio (as applicable) will result in numerous transactions in many or all the stocks or ETFs in the portfolio and the client accounts invested in this portfolio. Clients could be required to report some or all of these periodic rebalance trades on their tax forms. Clients should consult an accountant or tax attorney on tax matters as Interactive Advisors does not provide tax advice or prepare tax documents for its clients. Interactive Brokers LLC provides certain tools to assist you with your tax filings, but these tools may only be able to support a limited number of trades.

How we trade

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Interactive Advisors manages this portfolio by trading its own funds in a separate firm-owned brokerage account and replicating this trading in the accounts of investing clients as follows:

Interactive Advisors initially funds and trades a fixed amount of its own funds in a separate brokerage account associated with this portfolio based on internally generated data;
Interactive Advisors replicates the trading in this brokerage account in the accounts of clients investing in this portfolio in order to implement its replication-based investment process; and
Based on internally generated data, Interactive Advisors periodically rebalances this portfolio to maintain target allocations, resulting in rebalancing transactions in investing clients’ accounts.

How to invest

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To invest in this portfolio, Interactive Advisors clients must:

Sign an Investment Management Agreement with and become clients of Interactive Advisors;
Consent to trading with another Interactive Brokers LLC client who is a liquidity provider in order to be able to buy and sell fractions of ETF shares and stocks, which do not trade on the open market. Interactive Advisors clients may revoke this consent at any time but, if they do, they will no longer be able to invest in this portfolio. (Clients can see these fractional trades with the liquidity provider listed and identified on the periodic activity statements they receive from Interactive Brokers LLC); and
Obtain the minimum risk score required for each portfolio and acknowledge certain risk disclosures.

Small Cap Quality

Performance Chart

Metrics

Performance info

Risk metrics (last 365 days) info

Manager

IA Smart Beta

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Disclosures