“Mid-cap stocks, as represented by the S&P MidCap 400 Index, have delivered higher annualized returns than their large- and small-cap peers over the past 20 years,” said State Street. “What’s more, these returns were achieved with reduced volatility relative to small caps. This has resulted in mid-cap stocks delivering the highest risk-adjusted returns over this period.”

Middle capitalization stocks, sometimes referred to as the market’s sweet spot, could help investors achieve improved risk-adjusted returns. 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.

“Since mid-cap firms are established entities, this historically higher earnings growth has been accomplished with decreased reliance on debt relative to small-cap firms,” said State Street. “Over this same period (2000-2017), when considering short- and long-term liabilities, mid-cap firms have increased their total debt by 3.3 times while small caps have seen their debt levels increase by 4.5 times.”

For more information on mid-caps, visit our mid-cap category.