Alternatively, the SPDR Mid-Cap 400 (NYSEArca: MDY) covers the same mid-cap index. However, due to the older unit investment trust structure, the ETF is less flexible than Regulated Investment Company fund structures found in most other ETFs, like IJH. Consequently, MDY can not lend shares or efficiently reinvest dividends. MDY also issues a costlier a 0.25% expense ratio.
The Vanguard Mid-Cap ETF (NYSEArca: VO) tries to reflect the performance of the CRSP US Mid Cap Index. CRSP’s weighting methodology differs from the S&P. Consequently, the average market for a stock in the underlying index is $9 billion, which is less than the $62 billion in the S&P 500 and a little more than the $4 billion for the S&P 400. VO comes with a cheap 0.10% expense ratio.
Additionally, investors interested in a smart-beta offering can look at factor-based or rules-based index ETFs, like the First Trust Mid Cap Core AlphaDEX Fund (NYSEArca: FNX) or the Oppenheimer Mid Cap Revenue ETF (NYSEArca: RWK).
Related: Dividend ETFs for a Stubbornly Low-Yield Environment
FNX selects stocks from the S&P 400 Index, but chooses stocks based on growth factors, sales to price and one year sales growth, along with value factors like book value to price, cash flow to price and return on assets. Consequently, the ETF leans toward more small-cap names. FNX has a 0.66% expense ratio.
RWK selects components from the broad basket of S&P MidCap 400 stocks but reweights holdings based on each company’s revenue, producing a portfolio that could potentially provide a better representation of companies’ economic contribution to the benchmark index. When comparing RWK to the benchmark S&P MidCap 400, the revenue-weighted ETF takes a greater tilt toward small-capitalization stocks and leans toward the value category. The ETF has a 0.39% expense ratio.
For more information on middle capitalization stocks, visit our mid-cap category.
