April saw a nice bounce-back for equities whether it was large or small caps, but it was actually midcaps that were the strongest performers following a tumultuous March sell-off month. Given that, exchange-traded fund (ETF) investors may want to give midcap-focused funds a closer look.
In the case of certain funds, midcaps also outperformed safe-haven assets like gold.
“Within the U.S. market, mid-caps outperformed both large and small caps. iShares Core S&P Mid-Cap ETF (IJH), which has a Morningstar Analyst Rating of Gold, outpaced Gold-rated iShares Core S&P 500 ETF (IVV), chiefly because of its exposure to better-performing names in the consumer discretionary and healthcare sectors,” Ben Johnson of Morningstar wrote. “IJH also outstripped Gold-rated iShares Core S&P Small Cap ETF (IJR) in April. In this case, much of its relative performance can be attributed to stock selection within the healthcare and financial sectors.”
Growth opportunities can be had in small cap and mid cap companies that are still in the early stages of their businesses, which can lead to scalable growth under the right stewardship. As such, investors can look at this pair of ETFs— the Principal U.S. Small-Cap Multi-Factor Index ETF (PSC) and the Principal U.S. Small-MidCap Multi-Factor Core Index ETF (PSM).
PSC seeks investment results that closely correspond, to the performance of the Nasdaq US Small Cap Select Leaders Index. The fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies that compose the index. The index uses a quantitative model designed to identify equity securities (including growth and value stock) of small-capitalization companies in the Nasdaq US Small Cap Index (the “parent index”) that exhibit potential for high degrees of sustainable shareholder yield, pricing power, and strong momentum, while adjusting for liquidity and quality.
PSM seeks to provide investment results that closely correspond, before expenses, to the performance of the Nasdaq US Small Mid Cap Select Leaders Core Index. Under normal circumstances, the fund invests at least 80% of its net assets in equity securities of U.S. companies with small- to medium-market capitalizations that compose the index at the time of purchase. The index uses a quantitative model designed to identify equity securities of companies in the Nasdaq US Small Cap Index and Nasdaq US Mid Cap Index that exhibit potential for high degrees of sustainable shareholder value, growth, and strong momentum.
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