There is also the potential for reward in mid-cap investing, since such companies often find themselves ideal for acquisition by larger corporations, giving investors the opportunity for further reward.

Mid-Cap ETFs

Mid-cap ETFs generally are intended to add diversification to a broader large-cap portfolio.

Mid-cap ETFs come with three distinct indexing approaches: including traditional market-cap weighting, fundamental weighting based on earnings or dividends, and rules-based “quant” investing, which includes stocks based on P/E ratios or other quantitative measurements. In addition, leveraged and short mid-cap ETFs offer bets against the index or to add additional exposure to an index.

Traditional mid-cap ETFs are cheap and liquid, which makes them ideal for short-term traders and long-term investors alike. Potential investors should note the differences in composition and methodology in traditional index ETFs and the newer, exotic ETFs.

The biggest benefit to mid-cap ETFs might be that they save investors a lot of homework. Not all mid-cap companies are household names, which means that you could spend days digging up research on all of them. ETF providers do the legwork for you so that you get full exposure in one simple ETF.