Mid-cap stocks often get overlooked by investors, but they offer a balance of growth and stability that can be appealing. If you’re not keen on picking individual stocks, you can still benefit from mid-cap exposure through an ETF.
Understanding Mid-cap ETFs
A mid-cap ETF is a type of exchange-traded fund that focuses on mid-size companies in the market, typically valued between a few billion dollars to around $20 billion. These ETFs provide a way to invest in fast-growing companies with solid financial foundations without the need to analyze individual stocks.
Mid-cap companies may not be household names, but many of them play integral roles in our daily lives. Some of the best mid-cap stocks have the potential to grow into large-cap companies, offering significant returns on investment.
Investors are drawn to mid-cap companies for several reasons:
- Growth: Mid-cap companies often experience above-average growth rates, with many eventually transitioning into large-cap status.
- Financial stability: As mid-cap companies grow, they tend to become more financially stable, providing a level of security that smaller companies may lack.
- Defensive characteristics: Mid-cap companies have usually established themselves in their respective industries, making them more resilient to market fluctuations.
- Lower volatility: Due to their stability, mid-cap stocks tend to exhibit lower volatility compared to smaller companies, making them attractive to risk-averse investors.
For investors looking to capitalize on the benefits of mid-cap companies without the hassle of individual stock selection, investing in a mid-cap ETF can be a convenient solution.
Top Mid-cap ETFs to Consider
Bankrate has identified some of the top-performing mid-cap ETFs based on specific criteria:
- U.S. funds listed in ETF.com’s mid-cap screener
- Top performers over the past five years
- Exclusion of inverse or leveraged ETFs
- Performance data as of June 28, 2024, sourced from ETF.com
Invesco S&P MidCap Quality ETF (XMHQ)
This fund tracks the S&P MidCap 400 Quality Index, comprising companies with strong quality metrics.
- 2024 YTD performance: 15.2 percent
- Historical performance (annual over 5 years): 17.0 percent
- Expense ratio: 0.25 percent
Key Takeaways
Mid-cap ETFs offer a compelling opportunity to invest in companies with growth potential and financial stability, mitigating the risks associated with individual stock selection. While diversifying through an ETF can help manage risk, it’s important to remember that all investments carry some level of risk.
Editorial Disclaimer: Investors should conduct their own research before making investment decisions. Past performance is not indicative of future results.