Filmmaker, actor, and entrepreneur Elizabeth Banks teamed up with State Street Global Advisors (NYSE: STT) to find out why investors can often times overlook the mid-cap sector. As mid-cap companies help form the backbone of the country, Banks spoke with top advisors to learn what makes them tick.
As is pointed out early on, the “middle” has been consistently beating out small-cap and large-cap stocks when it comes to returns. It is even referred to as “the sweet spot.” And yet, there’s seemingly a bias against the middle.
To get a better understanding, Banks speaks with Sue Thompson, the Head of Americas Distribution for SPDR ETFs. As Thompson explains, with the media focusing on the S&P and the Dow, while the academics are more concerned with small-caps, there’s little room for mid-cap coverage.
“As a result, it goes unrecognized,” Thompson says.
A Lack Of Exposure
It’s a problem because people believe they have exposure to the middle as if the S&P includes mid-cap stocks, but it doesn’t. This underexposure isn’t great, as it means missing some essential things.
To touch on this, Banks also speaks with Matt Bartolini, Head of SPDR ETF Strategy & Research. Bartolini explains that without mid-cap stocks, investors are potentially missing more positive risk-adjusted returns.
“Mid-cap stocks tended to have higher risk-adjusted returns because they have typically been more stable than small caps, and they offer higher growth than large caps,” Bartolini clarifies. This is what makes the middle a sweet spot for investors, as they can find solid, risk-adjusted returns over a long time frame.
With these mid-caps, whether looking back over the last 25 years or other rolling 5-year periods, enough persistence comes out through that sweet spot in higher risk-adjust returns. Having this information could ideally change a lot of investors minds on where they can focus.
Watch Elizabeth Banks Tackle The Middle:
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