Why Invest in Mid-Cap Stocks via ETFs

ListingCard_1x1Thousands of mid-cap companies trade on the US markets. These companies generally tend to have small market caps of $1 billion to $5 billion. Though the actual definition of mid-cap companies varies,  they can be considered as firms that are neither huge such as the giants with multi-billion market caps or very small with a few million dollar market caps or start-up companies. Investing in these middle of the range companies is extremely tricky and investors are better off investing in them via ETFs.

Some of the reasons to invest in mid-cap stocks using ETFs are listed below:

  • Mid-cap stocks are extremely volatile and investing in ETFs reduces the volatility risk.
  • It is very difficult to follow and keep track of all the news and earnings releases from these firms.
  • Individual mid-cap stocks are very risky to invest since picking the winners from so many choices is not easy.
  • Some of these companies have low trading volumes which makes them volatile and difficult to trade.
  • Many of these mid-caps do not pay dividends or have very low dividend yields making them unattractive for dividend reinvestment for higher returns.
  • As the dividend yields are tiny or zero, they are not income producing investments. Hence they are not preferred by income investors.
  • Diversification benefits offered by an ETF are simply impossible to replicate for retail investors.
  • Investing in mid-caps through mutual funds is an expensive proposition as mutual fund companies charge higher fees for these funds.

Some of the ETFs to invest in the mid-cap space include:

  1. S&P MidCap 400 SPDR ETF (MDY)
  2. iShares Russell Midcap Index Fund (IWR)
  3. iShares S&P MidCap 400 Index Fund (IJH)
  4. iShares Russell Midcap Growth Index Fund (IWP)
  5. Powershares Dynamic Mid Cap Growth Portfolio Fund (PWJ)
  6. Powershares Dynamic Mid Cap Portfolio Fund (PJG)
  7. Schwab U.S. Mid-Cap ETF (SCHM)
  8. SPDR Dow Jones Wilshire Mid Cap ETF (EMM)
  9. SPDR S&P 400 Mid Cap Growth ETF (MDYG)
  10. Vanguard Mid-Cap ETF (VO)
  11. Vanguard Mid-Cap Growth ETF (VOT)
  12. Vanguard S&P Mid-Cap 400 ETF (IVOO)
  13. Vanguard S&P Mid-Cap 400 Growth ETF (IVOG)

Disclosure: No Positions

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