Middle-capitalization stocks are outperforming this year, and investors can also target the mid-cap segment through related exchange traded funds.
The middle capitalization category has also outperformed, with the S&P 400, a benchmark for mid-cap companies across the U.S., up 5.9% this year, compared to the 2.5% increase in the S&P 500 and 0.5% gain in the Russel 2000.
“Mid-cap stocks have been in the sweet spot of risk-adjusted performance since 1926,” according to Morningstar analyst Michael Rawson. “Although they historically have had a higher return than large caps, they have also had a higher volatility and a higher beta, or more procyclical movement with the market. But the higher return has compensated investors for the increased risk. While small caps had even higher returns, mid-caps have had a slightly better ratio of return to risk.”
Mid-cap companies are slightly more diversified than their small-cap peers, which allows many mid-sized companies to generate more consistent revenue and cash flow and provide more stable stock prices. Additionally, they are not so big that their size would slow down growth.[related_stories]