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Wall Street has been experiencing volatility in recent months. Inflation and interest rate concerns have taken center stage, with investors closely monitoring the actions of central banks and policymakers. Rising inflation has led to higher interest rates, which has impacted the stock market, particularly growth-oriented sectors that are sensitive to changes in interest rates. Growing geopolitical issues and recession fears have added to the concerns (read: 5 ETFs to Play as Inflation Cools Down to 5%).
Mid-cap investing can be a strong option in volatile stock markets, offering a unique balance between growth and stability, diversification benefits, and potential for undervalued opportunities.
Why Mid Caps?
Large-cap stocks tend to be household names with established businesses and small-cap stocks offer the excitement of undiscovered opportunities. On the other hand, mid-cap stocks occupy a unique position in the market, combining the stability of large-cap stocks with the growth potential of small-cap ones.
Mid-cap companies occupy a sweet spot in the market, as they have typically outgrown their small-cap counterparts and proven their business models but have not yet reached the size and maturity of large-cap companies. This transitional stage often results in higher growth rates and attractive risk-return characteristics.
Including mid-cap stocks in a portfolio can provide valuable diversification benefits, as they often exhibit different risk-return characteristics compared to large-cap and small-cap stocks. This diversification can help reduce the overall risk of a portfolio, particularly during periods of market volatility, by spreading investments across various market segments that may be impacted differently by market fluctuations (read: Low Volatility ETFs to Play Stock Market Volatility).
As a result, mid-cap stocks often exhibit greater growth potential than large caps while providing more stability than small-cap stocks.
Mid-Cap ETFs
To invest in this space, ETFs have emerged as a popular way for investors to access mid-cap stocks, offering several advantages. While there are several ETF choices available in the mid-cap space, we have highlighted some solid choices that currently boast a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy), suggesting their outperformance in the months ahead.
Vanguard Mid-Cap ETF tracks the CRSP US Mid-Cap Index. It holds 343 stocks with a well-diversified portfolio, as each firm holds no more than 0.8% of the total assets. Vanguard Mid-Cap ETF has key holdings in industrials, technology, consumer discretionary, financials and healthcare.
With AUM of $52.6 billion, Vanguard Mid-Cap ETF charges investors 4 bps in fees per year and trades in an average daily volume of 537,000 shares. Vanguard Mid-Cap ETF has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
iShares Russell Mid-Cap ETF follows the Russell MidCap Index and holds 815 stocks in its basket. With AUM of $27.7 billion, it has key holdings in industrials, information technology, financials, consumer discretionary and healthcare that account for double-digit exposure each.
iShares Russell Mid-Cap ETF charges investors 18 bps in annual fees and trades in an average daily volume of 1.2 million shares. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
SPDR Portfolio S&P 400 Mid Cap ETF targets the broad mid-cap segment of the broad U.S. market. It tracks the S&P MidCap 400 Index and holds 401 stocks in its basket, with each accounting for no more than 0.7% share. Industrials , consumer discretionary, and financials are the top three sectors with a double-digit allocation each.
SPDR Portfolio S&P 400 Mid Cap ETF has accumulated $6 billion in its asset base while trading in a volume of 714,000 shares per day on average. It charges 5 bps in annual fees and has a Zacks ETF Rank #1.
Vanguard S&P Mid-Cap 400 ETF also offers exposure to broad mid-capitalization stocks. It follows the S&P MidCap 400 Index, holding 401 securities with none accounting for more than 0.7% share. Industrials, consumer discretionary, financials, and information technology are the top four sectors with double-digit exposure each.
Vanguard S&P Mid-Cap 400 ETF has managed $1.5 billion in its asset base and trades in volume of around 66,000 shares a day on average. The ETF charges 10 bps in annual fees and has a Zacks ETF Rank #1 with a Medium risk outlook.
Invesco S&P MidCap Quality ETF tracks the S&P MidCap 400 Quality Index, which is a modified market capitalization-weighted index that holds stocks on the S&P Midcap 400 Index with the highest quality scores. It holds 81 stocks in its basket, with each making up for no more than 3.2% of assets. Invesco S&P MidCap Quality ETF has key holdings in industrials, consumer discretionary, information technology and healthcare with double-digit exposure each (read: Quality ETFs to Buy for Market-Beating Returns Amid Turmoil).
Invesco S&P MidCap Quality ETF has amassed $561.3 million in its asset base and trades in an average daily volume of 58,000 shares. It charges 25 bps in annual fees.
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Here's Why You Should Buy Mid-Cap ETFs
Wall Street has been experiencing volatility in recent months. Inflation and interest rate concerns have taken center stage, with investors closely monitoring the actions of central banks and policymakers. Rising inflation has led to higher interest rates, which has impacted the stock market, particularly growth-oriented sectors that are sensitive to changes in interest rates. Growing geopolitical issues and recession fears have added to the concerns (read: 5 ETFs to Play as Inflation Cools Down to 5%).
Mid-cap investing can be a strong option in volatile stock markets, offering a unique balance between growth and stability, diversification benefits, and potential for undervalued opportunities.
Why Mid Caps?
Large-cap stocks tend to be household names with established businesses and small-cap stocks offer the excitement of undiscovered opportunities. On the other hand, mid-cap stocks occupy a unique position in the market, combining the stability of large-cap stocks with the growth potential of small-cap ones.
Mid-cap companies occupy a sweet spot in the market, as they have typically outgrown their small-cap counterparts and proven their business models but have not yet reached the size and maturity of large-cap companies. This transitional stage often results in higher growth rates and attractive risk-return characteristics.
Including mid-cap stocks in a portfolio can provide valuable diversification benefits, as they often exhibit different risk-return characteristics compared to large-cap and small-cap stocks. This diversification can help reduce the overall risk of a portfolio, particularly during periods of market volatility, by spreading investments across various market segments that may be impacted differently by market fluctuations (read: Low Volatility ETFs to Play Stock Market Volatility).
As a result, mid-cap stocks often exhibit greater growth potential than large caps while providing more stability than small-cap stocks.
Mid-Cap ETFs
To invest in this space, ETFs have emerged as a popular way for investors to access mid-cap stocks, offering several advantages. While there are several ETF choices available in the mid-cap space, we have highlighted some solid choices that currently boast a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy), suggesting their outperformance in the months ahead.
These include Vanguard Mid-Cap ETF (VO - Free Report) , iShares Russell Mid-Cap ETF (IWR - Free Report) , SPDR Portfolio S&P 400 Mid Cap ETF (SPMD - Free Report) , Vanguard S&P Mid-Cap 400 ETF (IVOO - Free Report) and Invesco S&P MidCap Quality ETF (XMHQ - Free Report) .
We have profiled the ETFs below:
Vanguard Mid-Cap ETF (VO - Free Report)
Vanguard Mid-Cap ETF tracks the CRSP US Mid-Cap Index. It holds 343 stocks with a well-diversified portfolio, as each firm holds no more than 0.8% of the total assets. Vanguard Mid-Cap ETF has key holdings in industrials, technology, consumer discretionary, financials and healthcare.
With AUM of $52.6 billion, Vanguard Mid-Cap ETF charges investors 4 bps in fees per year and trades in an average daily volume of 537,000 shares. Vanguard Mid-Cap ETF has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
iShares Russell Mid-Cap ETF (IWR - Free Report)
iShares Russell Mid-Cap ETF follows the Russell MidCap Index and holds 815 stocks in its basket. With AUM of $27.7 billion, it has key holdings in industrials, information technology, financials, consumer discretionary and healthcare that account for double-digit exposure each.
iShares Russell Mid-Cap ETF charges investors 18 bps in annual fees and trades in an average daily volume of 1.2 million shares. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
SPDR Portfolio S&P 400 Mid Cap ETF (SPMD - Free Report)
SPDR Portfolio S&P 400 Mid Cap ETF targets the broad mid-cap segment of the broad U.S. market. It tracks the S&P MidCap 400 Index and holds 401 stocks in its basket, with each accounting for no more than 0.7% share. Industrials , consumer discretionary, and financials are the top three sectors with a double-digit allocation each.
SPDR Portfolio S&P 400 Mid Cap ETF has accumulated $6 billion in its asset base while trading in a volume of 714,000 shares per day on average. It charges 5 bps in annual fees and has a Zacks ETF Rank #1.
Vanguard S&P Mid-Cap 400 ETF (IVOO - Free Report)
Vanguard S&P Mid-Cap 400 ETF also offers exposure to broad mid-capitalization stocks. It follows the S&P MidCap 400 Index, holding 401 securities with none accounting for more than 0.7% share. Industrials, consumer discretionary, financials, and information technology are the top four sectors with double-digit exposure each.
Vanguard S&P Mid-Cap 400 ETF has managed $1.5 billion in its asset base and trades in volume of around 66,000 shares a day on average. The ETF charges 10 bps in annual fees and has a Zacks ETF Rank #1 with a Medium risk outlook.
Invesco S&P MidCap Quality ETF (XMHQ - Free Report)
Invesco S&P MidCap Quality ETF tracks the S&P MidCap 400 Quality Index, which is a modified market capitalization-weighted index that holds stocks on the S&P Midcap 400 Index with the highest quality scores. It holds 81 stocks in its basket, with each making up for no more than 3.2% of assets. Invesco S&P MidCap Quality ETF has key holdings in industrials, consumer discretionary, information technology and healthcare with double-digit exposure each (read: Quality ETFs to Buy for Market-Beating Returns Amid Turmoil).
Invesco S&P MidCap Quality ETF has amassed $561.3 million in its asset base and trades in an average daily volume of 58,000 shares. It charges 25 bps in annual fees.