Mid-cap stocks are medium-sized companies with market capitalizations of between $2 billion and $10 billion. Mid-cap stocks exist in the…
Mid-cap stocks are medium-sized companies with market capitalizations of between $2 billion and $10 billion. Mid-cap stocks exist in the sweet spot between the often riskier small-cap stocks and the sometimes slower-growing large-cap stocks. Many investors feel that mid-caps offer a reasonable and compelling blend of stability and capital appreciation potential.
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Established mid-cap companies tend to be in a growth and expansion phase. They are more likely to reinvest profits into technology, growth opportunities or market share expansion than their large-cap counterparts, who might use that money to fund a share buyback program or pay a large dividend. Unlike smaller companies, mid-sized firms have more established operations and proven business plans. Mid-cap companies also have better access to capital through bank loans and bond issues. All this can reduce the risk of failure compared to small-cap companies.
Yet, mid-cap firms usually still have plenty of room to grow, both geographically and in terms of market penetration. They are agile enough to innovate on the fly and adapt to changing industry, market and economic conditions. For all these reasons, mid-caps are one of the most appealing equity types for risk-conscious investors seeking long-term growth.
But with thousands of publicly traded mid-cap stocks to choose from, how does an investor know which ones to buy?
One of the best ways to gain exposure to mid-caps is through index exchange-traded funds, commonly called ETFs. The stocks in a mid-cap index ETF typically reflect those in the underlying index. Most mid-cap index ETFs hold several hundred individual stocks or more, providing investors with excellent diversification that they could not easily achieve on their own. Index fund ETF investing is cost-effective as well, because index funds don’t require active management, and internal trading is usually minimal.
The following list of seven high-quality mid-cap index ETFs is not meant to be definitive, but it does represent a good range of funds to consider and is an excellent place for any investor to begin their research into this potentially profitable asset class:
| ETF | Market Capitalization | Expense Ratio |
| iShares Morningstar Mid-Cap ETF (ticker: IMCB) | $988 million | 0.04% |
| Vanguard Mid-Cap Growth Index Fund ETF Shares (VOT) | $27.4 billion | 0.07% |
| Vanguard Mid-Cap Value Index Fund ETF Shares (VOE) | $29.1 billion | 0.07% |
| SPDR S&P MIDCAP 400 ETF Trust (MDY) | $21.2 billion | 0.24% |
| JPMorgan BetaBuilders U.S. Mid Cap Equity ETF (BBMC) | $1.7 billion | 0.07% |
| iShares Russell Mid-Cap ETF (IWR) | $38.5 billion | 0.19% |
| iShares ESG Select Screened S&P Mid-Cap ETF (XJH) | $254 million | 0.12% |
iShares Morningstar Mid-Cap ETF (IMCB)
IMCB is a mid-cap index fund with $988 million in net assets. The objective of the fund is to replicate the performance of the Morningstar U.S. Mid Cap Index, less the fund’s low expense ratio of 0.04%.
The index that underlies IMCB is a compelling benchmark that provides exposure to mid-sized U.S. companies that offer dynamic growth opportunities. It covers a wide range of investment sectors that include technology, health care, industrials and more.
In general, the fund offers a reasonable blend of relative stability, growth potential and diversification. IMCB might be the right choice for investors looking to take advantage of the opportunities in domestic mid-caps.
IMCB seeks to provide a balance of growth, stability, and — with 450 holdings — great diversification, making it a solid choice for investors looking to take advantage of opportunities in domestic small-cap equities. IMCB has a current dividend yield of 1.5%.
Vanguard Mid-Cap Growth Index Fund ETF Shares (VOT)
VOT is a low-cost index ETF designed to mirror the CRSP U.S. Mid Cap Growth Index. The fund’s expense ratio is 0.07%. After those costs are accounted for, VOT should follow its benchmark with very little tracking error.
The CRSP U.S. Mid Cap Growth Index holds about 133 stocks that represent the mid-cap growth stock segment of the CRSP U.S. Total Market Index. The portfolio is constructed by screening the 1,400 stocks in the CRSP U.S. Total Market Index to identify mid-cap stocks that exhibit growth characteristics like accelerating revenue and earnings growth and stock price momentum.
VOT offers investors a simple, cost-effective way to gain exposure to a diversified basket of mid-cap growth companies, but because of the relatively small number of holdings and the nature of mid-sized stocks, Vanguard recommends this fund for aggressive investors.
VOT has a dividend yield of 0.7%.
Vanguard Mid-Cap Value Index Fund ETF Shares (VOE)
The next fund on today’s list is another Vanguard ETF that happens to be a perfect complement to VOT, the previous fund on the list. VOE has net assets of $29 billion and works the same way as VOT, except this fund invests in mid-cap value stocks rather than mid-cap growth stocks.
The fund mirrors the CRSP U.S. Mid Cap Value Index, which is a subset of the CRSP U.S. Total Market Index. VOE’s benchmark evaluates the entire CRSP U.S. Total Market Index and identifies mid-cap stocks that, according to various fundamental characteristics, are undervalued compared to their peers.
The fund has an expense ratio of 0.07% and can be used by investors either as a stand-alone fund or to balance and enhance other holdings such as the aforementioned VOT.
The fund has a current dividend yield of 2.4%.
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SPDR S&P MIDCAP 400 ETF Trust (MDY)
MDY tracks the popular S&P MidCap 400 Index. The objective of the fund is to match the performance of its benchmark after the expense ratio of 0.24% is accounted for.
MDY holds 400 mid-cap companies with market caps between $2 billion and $10 billion. This ETF is designed to be a proxy for the general universe of mid-cap equities, providing growth potential but hopefully with less volatility and overall risk than smaller companies.
To be eligible for inclusion in the MDY portfolio, companies must fall within the defined mid-cap range, be based in the U.S., be highly liquid with good trading volume and have positive earnings in recent quarters.
The fund pays a quarterly dividend and has a current yield of 1.4%.
JPMorgan BetaBuilders U.S. Mid Cap Equity ETF (BBMC)
BBMC is a low-cost $1.7 billion ETF; after the low expense ratio of 0.07% is subtracted, the fund should replicate the performance of the Morningstar U.S. Mid Cap Target Market Exposure Extended Index. The benchmark is a free-float adjusted index, meaning it adjusts weightings based on the size of the companies’ “free float,” or the number of shares publicly available for trading. This weighting method favors more liquid stocks by excluding shares held by insiders or other restricted entities.
Socially conscious investors should be aware that BBMC does not take environmental, social and governance (ESG) factors into account when selecting stocks. There are about 600 holdings in the fund’s portfolio. The ETF has a yield of 1.5%.
iShares Russell Mid-Cap ETF (IWR)
The Russell MidCap Index is a highly regarded equity index that tracks the performance of domestic mid-sized stocks. The benchmark gets its credibility from the fact that it is a subset of the Russell 1000 Index, which is, in turn, derived from the broad market Russell 3000 Index. The Russell MidCap Index is focused on middle-tier market capitalization Russell 1000 stocks, providing a comprehensive representation of the mid-cap universe. IWR is an iShares ETF that tracks the Russell MidCap Index and delivers substantially identical returns after the expense ratio of 0.19% is accounted for.
IWR is a good-sized mid-cap ETF with net assets topping $38 billion and a current yield of 1.4%. The fund holds the smallest 800 stocks by market cap in the Russell 1000. Generally, the stocks in this fund’s portfolio will have market capitalizations of between $2 billion and $10 billion, but precise market-cap numbers can vary based on market conditions and the composition of the parent index.
Like BBMC, IWR is free-float adjusted, but it is also cap weighted, meaning more emphasis is given to larger companies with larger public floats.
iShares ESG Select Screened S&P Mid-Cap ETF (XJH)
Environmental, social and governance (ESG) factors are important to many investors. The last ETF on today’s list pays close attention to ESG and should be given thorough consideration by socially conscious mid-cap investors.
This low-cost $254 million index fund eliminates exposure to controversial companies by tracking the S&P MidCap 400 Sustainability Screened Index. Investors won’t find weapons manufacturers, tobacco companies, fossil fuel stocks or companies with a record of human rights abuses in the XJH portfolio.
Other than energy and minerals, the fund maintains nearly identical sector weightings to the S&P MidCap 400. About 22% of the fund’s assets are in industrial stocks, 17% are in financials, close to 15% are in consumer discretionary, 10% is allocated to health care and the balance is in technology.
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7 Best Mid-Cap ETFs to Buy Today originally appeared on usnews.com
Update 05/15/25: This story was previously published at an earlier date and has been updated with new information.