Still overlooked by many investors, mid-cap stocks and the corresponding exchange traded funds continue delivering impressive performances, proving that ignoring mid-caps can prove hazardous to a portfolio’s health.

Over the past three months, the SPDR S&P MidCap 400 ETF (NYSEArca: MDY) and the iShares Core S&P Mid-Cap ETF (NYSEArca: IJH) have slightly lagged the performance of the S&P 500, but mid-caps have a long-standing track of out-performance over broader U.S. indices.

Mid-caps stocks are also relatively neglected and often overlooked – to the detriment of equity investors who may miss out on holding future leaders in their respective industries before becoming better known large-cap names,” said S&P Dow Jones Indices Vice President Philip Murphy in a recent research note. The relative obscurity may be partially due to the academic focus on the size factor as a structural driver of returns. “Small Minus Big (SMB)”, as the Fama/French size factor is known, leaves no thought of “mid” as a way to drive long-term performance. Another reason may be the popularity of large-cap and small-cap benchmarks like the S&P 500 and Russell 2000.”

Investors should not interpret that to mean a play on mid-cap ETFs is one devoted to a small, thinly traded fund. MDY has almost $15.9 billion in assets under management, up from $15.1 billion at the start of June. IJH is an almost $22 billion ETF and the trailing three-month average daily volume on both funds averages out to about 1.8 million shares with relatively tight bid/ask spreads. [Mid-Cap ETF Opportunity]

“Mid-caps stocks, as a group, have some interesting characteristics. In many ways, they have the potential to offer the best of both worlds – possibly greater dynamism than grown-up siblings and more maturity than little brothers and sisters,” adds Murphy.

Regarding long-term out-performance by a mid-cap ETF, the WisdomTree MidCap Dividend Fund (NYSEArca: DON) fits the bill. Since the March 9, 2009 market bottom, DON is up 341.3%, including paid dividends. MDY is up 279.2% over that period while the S&P 500 is higher by “just” 230.4%.