Mid-cap stocks and exchange traded funds are an overlooked asset class that can serve as an alternative to large-cap shares.

Mid-cap shares are those that are too small to be blue-chip stocks, but have larger market caps than the Russell 2000 allows. The S&P Midcap 400 Index is comprised of stocks that have a market cap of $1 billion, but no more than $4.4 billion, writes David Penn for Forbes.

The latest global economic slowdown has caused mid-cap stocks and ETFs to take a backseat to the large-cap U.S. equities. In general, mid-caps tend to outperform in a growing economy.

Another feature of mid-cap companies is that they have the potential for greater capital appreciation while still giving relatively “safe” exposure. Small-caps and micro-caps are subject to much more volatility. [Mid-Cap ETFs: Take Your Pick]

Mid-cap ETFs could set up portfolios to gain when the economy recovers and sentiment claws out from the basement. [Mid-Cap ETFs Get Their Momentum in the Limelight]

Some mid-cap ETFs:

  • SPDR S&P Midcap 400 ETF( NYSEArca: MDY)
  • iShares Russell Midcap Index Fund (NYSEArca: IWR)
  • iShares Morningstar Mid Core Index Fund (NYSEArca: JKG)
  • WisdomTree Midcap Dividend fund (NYSEArca: DON)

Tisha Guerrero contributed to this article.

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