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.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.