Many investors are drawn to the biggest names on Wall Street, like Apple Inc. (ticker: AAPL) and Microsoft Corp. (MSFT), because of their maturity and brand power. Others are drawn to smaller firms like software startups or development-stage drugmakers that are hard at work researching the next potential blockbuster.
But what about midsize companies that are the best of both worlds? You get a firm that has a modest amount of stability, since they are not as tiny as the smallest operators on Wall Street, but you also get the potential for bigger upside as these companies are not the trillion-dollar behemoths that tend to dominate financial news.
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These “Goldilocks” stocks provide an interesting investment opportunity, and the following mid-cap index funds offer diversified ways to buy into this asset class via a single holding:
| Fund | Expense ratio |
| iShares Core S&P Mid-Cap ETF (IJH) | 0.05% |
| Vanguard Mid-Cap ETF (VO) | 0.04% |
| iShares Russell Midcap ETF (IWR) | 0.18% |
| iShares Russell Mid-Cap Value ETF (IWS) | 0.23% |
| Vanguard Mid-Cap Growth ETF (VOT) | 0.07% |
| iShares Morningstar Mid-Cap Growth ETF (IMCG) | 0.06% |
| WisdomTree U.S. MidCap Dividend ETF (DON) | 0.38% |
| Invesco S&P MidCap Low Volatility ETF (XMLV) | 0.25% |
iShares Core S&P Mid-Cap ETF (IJH)
The largest mid-cap index fund on Wall Street — and one of the largest exchange-traded funds, or ETFs, of any flavor — is this leading iShares offering tied to the S&P MidCap 400 Index. Many investors are familiar with the S&P 500, but the 400 stocks in this index excludes behemoths like Apple as well as all the smallest and often riskier companies on Wall Street. It’s elegantly simple, like most index funds, and it’s a popular and cost-effective way to engage with this strategy.
Assets under management, or AUM: $73.5 billion Expense ratio: 0.05%, or $5 per year on every $10,000 invested
Vanguard Mid-Cap ETF (VO)
Another massive mid-cap index fund is this Vanguard offering benchmarked to the CRSP U.S. Mid Cap Index. That acronym is short for the Center for Research in Security Prices, which is part of the University of Chicago Booth School of Business.
Vanguard has partnered with the CRSP because, as an academic institution, it offers both rigor as well as cost-effectiveness in its index methodology. About 330 stocks make up the index and are a great representation of the universe of mid-size U.S. stocks — and as the rock-bottom fee structure shows, Vanguard can provide this strategy at minimal cost to investors.
AUM: $56 billion Expense ratio: 0.04%
iShares Russell Midcap ETF (IWR)
Another popular iShares fund, IWR is tied to a different benchmark than the prior offerings. Its Russell MidCap Index follows a largely similar methodology to the prior funds, however.
The Russell Midcap Index consists of companies with market capitalizations between $2 billion and $10 billion. In other words, it’s a mid-cap index that is built by excluding the largest stocks, which is fundamentally how the others work, even if named differently. The difference is that it’s deeper, with a count of about 800 companies, giving a slightly broader swath of the marketplace.
AUM: $30 billion Expense ratio: 0.18%
iShares Russell Mid-Cap Value ETF (IWS)
A little bit pricier from an expense perspective, and a little more complicated, is this sister iShares fund, which again involves the Russell Midcap Index but layers on a screen to focus on stocks that exhibit value characteristics. More appropriately, it excludes the roughly 100 or so stocks in the core index that don’t make the cut to give your investments a bias toward companies with better readings on metrics like book value or price-to-sales ratios.
That means a slightly different composition with about 15% in financials instead of 13% like the broader IWR mid-cap fund. It also has significantly less tech exposure, with 12% in the sector as opposed to 16% in the more vanilla IWR portfolio.
AUM: $13 billion Expense ratio: 0.23%
Vanguard Mid-Cap Growth ETF (VOT)
Similar to the prior fund, this ETF focuses on a growth-oriented strategy by including stocks that exhibit better sales and profit trends than their peers. The CRSP U.S. Mid Cap Growth Index that powers this fund comprises about 160 companies. This more tactical approach with a smaller list of stocks does make it a bit more aggressive, but it’s still one of the best mid-cap index ETFs out there.
AUM: $11 billion Expense ratio: 0.07%
iShares Morningstar Mid-Cap Growth ETF (IMCG)
If you want a growth-oriented fund that’s a bit broader, this iShares offering has a bigger list of about 300 components. It uses an index of mid-cap stocks curated by investment research firm Morningstar and then refines it to limit exposure to mid-sized U.S. companies whose earnings are expected to grow at an above-average rate relative to other stocks in the marketplace. It’s also a hair cheaper than the Vanguard fund, too, allowing for a strategic approach without costing you an arm and a leg.
AUM: $1.6 billion Expense ratio: 0.06%
WisdomTree U.S. MidCap Dividend ETF (DON)
Keeping with this approach of getting more focused in how we slice the mid-cap marketplace, this fund is tied to the WisdomTree U.S. MidCap Dividend Index. That’s a finer slice of the broader WisdomTree U.S. Dividend Index that holds more than 1,000 dividend-paying stocks.
In the case of this mid-cap index, the largest and smallest tranches are excluded to create a list of about 350 mid-sized dividend payers. All told, the trailing yield on this mid-cap ETF is 2.8%, which is significantly higher than the roughly 1.6% or so offered by the S&P 500 index of large U.S. stocks.
AUM: $3.4 billion Expense ratio: 0.38%
Invesco S&P MidCap Low Volatility ETF (XMLV)
Our final option here is a fund that takes the aforementioned S&P mid-cap index then takes 20% of those picks based on stability and the lowest realized volatility over the last 12 months. That gives you a list of just 79 positions in this fund, and it makes XMLV perhaps the most targeted mid-cap index ETF on this list. It’s also one of the more active, as the index itself — and thus the fund’s portfolio — are reconstituted quarterly to reflect the latest market activity.
That gives it a “turnover” of about 61% a year, whereas the largest and most straightforward mid-cap ETFs on this list only see about 20% of their holdings move off the list in a typical year. Still, if you want to invest in mid-cap companies but keep a lid on volatility, this is an option worth a look.
AUM: $1 billion Expense ratio: 0.25%
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8 Best Mid-Cap Index Funds to Buy originally appeared on usnews.com
Update 07/28/23: This story was published at an earlier date and has been updated with new information.
