Mid-cap stocks are often overlooked by investors, but they offer a balance of solid growth and financial stability. If you’re not keen on investing in individual stocks, consider exploring mid-cap stocks through an ETF.
Understanding Mid-cap ETFs
A mid-cap ETF is an exchange-traded fund that focuses on mid-size companies with market capitalizations ranging from a few billion dollars to around $20 billion. Investing in mid-cap ETFs allows you to benefit from the growth potential and stability of these companies without the need to analyze individual stocks.
Mid-cap companies offer various advantages to investors:
- 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, offering a level of security that is higher than small-caps but lower than large-caps.
- Defensive Businesses: Mid-cap companies have typically established a strong position within their market niche, enhancing their overall safety.
- Less Volatility: Due to their increased stability, mid-cap stocks tend to exhibit less volatility compared to smaller companies, making them a suitable option for risk-averse investors.
If you’re not interested in hands-on investing and prefer a more straightforward approach, consider investing in a mid-cap ETF. (You can also explore the best small-cap ETFs and large-cap ETFs based on their performance.)
Top-performing Mid-cap ETFs
When selecting top mid-cap funds, Bankrate considered the following criteria:
- U.S. funds listed in ETF.com’s mid-cap screener
- Funds with strong performance over the past five years
- No leveraged or inverse ETFs
- Performance data as of Aug. 30, 2024, sourced from ETF.com
Invesco S&P MidCap Quality ETF (XMHQ)
This passively managed fund tracks the S&P MidCap 400 Quality Index, comprising 80 stocks that demonstrate strong quality characteristics.
- 2024 YTD Performance: 18.7%
- Historical Performance (5-year annual): 18.2%
- Expense Ratio: 0.25%
Invesco S&P MidCap 400 Revenue ETF (RWK)
This fund follows the S&P 400 MidCap 400 Revenue-Weighted Index, which reweights stocks based on revenue.
- 2024 YTD Performance: 9.6%
- Historical Performance (5-year annual): 17.2%
- Expense Ratio: 0.39%
Key Considerations
Mid-cap ETFs offer a compelling investment opportunity, combining growth potential with stability. While ETFs can help diversify risk, it’s essential to conduct thorough research before making any investment decisions.
Editorial Disclaimer: Investors are encouraged to conduct independent research on investment strategies before making decisions. Past performance does not guarantee future returns.