Easily one of the primary selling points of exchange traded funds continues to be low fees. ETF expenses continue falling as issuers fight for investors’ assets and investors are benefiting as a result. Lower fees are making scores of asset classes cheaper for investors to access while potentially improving long-term returns.
Count mid-cap ETFs among the group of ETFs that have gotten cheaper over time. That group includes the iShares Core S&P Mid-Cap ETF (NYSEArca: IJH) , which charges just 0.07% per year, or $7 on a $10,000 investment. That makes IJH one of the least expensive mid-cap ETFs on the market today.
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.
The mid-caps segment has also outperformed their large-cap peers, but with lower volatility than small caps. Moreover, the returns of mid-cap stocks have also beaten those of small-cap stocks during the trailing three-, five-, and 10-year periods, with lower volatility.
IJH “offers diversified exposure to U.S. mid-cap stocks. A low fee and a soundly constructed and reasonably representative benchmark give this ETF a great position to continue its long streak of producing superior risk-adjusted returns relative to its category peers over the long haul and underpin its Morningstar Analyst Rating of Gold,” said Morningstar in recent note.
IJH, which follows the S&P MidCap 400 Index, holds 401 stocks. The ETF devotes about a third of its weight to technology and financial services stocks. Industrial and consumer discretionary stocks combine for another 27%.
“Mid-cap stocks have been in the sweet spot with respect to their risk-adjusted performance since 1926,” said Morningstar. “Although they have historically 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 taking this increased risk.”
Rivals to IJH include the SPDR S&P MidCap 400 ETF (NYSEArca: MDY), Schwab U.S. Mid-Cap ETF (NYSEArca: SCHM) and the Vanguard Mid-Cap ETF (NYSEArca: VO), among others.
For more information on mid-caps, visit our mid-cap category.