High-flying tech names that powering large cap growth might have gotten the shine in the bull market, but mid cap ETFs like the iShares Russell Mid-Cap Growth ETF (IWP) are quickly becoming unsung heroes.
“Though large-cap growth stocks have been the main drivers of the stock market’s rally since the COVID-19 pandemic-led correction in March last year, mid-cap stocks have been no less attractive to analysts and investors,” a Stock News article said.
Mid cap names tend to strike the balance between large and small cap characteristics. They can help capture the upside when markets are trending higher, but not absorb the brunt of the blow during a downturn.
“There is a risk associated with investing in mid-cap stocks because they tend to be more volatile than their larger peers,” the article added. “However, we think it’s worth considering mid-cap players now because most large-cap growth stocks are trading at lofty valuations, making them more susceptible to a pullback. Moreover, given their relatively smaller size, small-cap companies have more room for growth.”
IWP seeks to track the investment results of the Russell Midcap Growth Index, which measures the performance of the mid-capitalization growth sector of the U.S. equity market. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index.
The fund may invest the remainder of its assets in certain futures, options and swap contracts, cash, and cash equivalents, as well as in securities not included in the underlying index, but which the advisor believes will help the fund track the underlying index. IWP investors get:
- Exposure to mid-sized U.S. companies whose earnings are expected to grow at an above-average rate relative to the market
- Targeted access to a specific category of mid cap domestic stocks
- Use to tilt portfolios toward growth stocks
Renewed Buying in Mid Cap ETFs
Using the Russell Midcap index as a baseline performance indicator, mid caps have been strong performers the last few months. The index itself is up about 9% as investors start to dial up the risk once again in equities as a vaccine rally continues through 2021.
“Valuations are more attractive in mid-small-caps, there is renewed buying in this segment,” said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
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