Companies situated in the middle of the market capitalization range could be on the cusp of breaking out. In midcap companies, investors could get exposure to the market’s next big thing.
Picking the next Microsoft or Apple from a universe of small cap companies means swinging for the fences. Most strike out rather than hit a home run. However, with midcap companies, investors can get closer to a stock that could make the transition to a large cap titan of its respective industry.
“Mid-cap stocks can often be overlooked,” a Forbes article explained. “Large-cap stocks get most of the press, as they dominate investor portfolios and media coverage, in part due to their visibility and brand names. And small-cap stocks have a reputation for being where some of the ‘next great companies’ can ascend from.”
Large cap companies are lauded for their relative stability, particularly when heavy volatility hits the market. Small cap companies can offer tremendous upside when markets trend higher. Midcap companies tend to strike a balance between the two, appealing to investors looking for that quality and growth median.
“But it is a mistake to ignore mid-caps because these stocks typically have more potential for growth than large-caps with less risk than small-caps,” the Forbes article added.
Speaking of growth, investors who want midcap exposure with an increased focus on growth can look to the American Century Mid Cap Growth Impact ETF (MID). In addition, it appeals to investors wanting an even more discerning screener of identifying companies with an environmental, social, and governance (ESG) component into their investing mix.
MID employs an active management strategy, meaning the fund is under the auspices of market professionals that can adjust the portfolio holdings as necessary when market conditions warrant a change. MID investors can harness this flexibility at a low cost with the fund’s 0.45% expense ratio.
2 More ETF Options
While MID offers a growth slant, for a more value-oriented focus, investors can opt for the Avantis U.S. Mid Cap Value ETF (AVMV). The fund is ideal for the more discerning investor looking to drill down to companies with strong fundamentals. With its more selective strategy, AVMV still boasts over 200 holdings, giving it added diversity while maintaining its value-focused screener to drill down on companies with strong fundamentals.
For an overall option that doesn’t cater to a specific factor-based strategy, investors can also opt for the Avantis U.S. Mid Cap Equity ETF (AVMC). With over 500 holdings, AVMC is deeply diversified. Its team of portfolio managers handpick holdings that trade at low valuations and have the potential for high profitability.
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