Small cap companies can offer investors more performance in the throes of a market rally. But the more risk averse may not want to add the extra volatility to their portfolios. However, they can strike a balance between small cap growth and large cap value with midcap exposure.
Midcap companies are further along in the growth stage compared to small cap companies that are still gaining traction in their respective marketplace. Still, midcap companies have more room to grow. Large cap companies may be more focused on maintenance, eschewing the flexibility small and midcap companies can have if a change of direction is necessary.
Another advantage is where they can apply their human capital. This is especially important as a company’s workforce can make or break an organization.
“Well, small-cap companies do not have the time nor the available bodies to sit around in an unproductive meeting,” a Financial Post article said. The piece noted the advantages small and midcap companies offer in terms of innovation. Simply put, small and midcap companies have less tolerance for bureaucratic red tape versus large cap companies, where they may tend to get mired in politicking. That said, small and midcap companies can apply their talent where it matters. They can focus on more innovation and being competitive in their respective marketplace.
“Employees need to get out there and hustle. Decisions can be made in minutes, not years,” the article by Peter Hodson added. “This more rapid pace can sometimes mean small companies are ahead of the curve on new developments and market opportunities.”
2 Active Midcap ETF Options From Avantis
Investors looking to get midcap exposure have a plethora of opportunities. But an easy way is to get active exposure through one fund that, like small and midcaps, can flex with the changing market conditions. One such fund worth considering is 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.
For a more value-oriented slant, 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 focus.
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