There are several indexes for tracking mid-cap stocks. The most widely referenced is the S&P Mid-Cap 400but others include the Russell Midcap and Wilshire US Mid-Cap Index. Used as a tool for investing in stocks, index mutual funds, or exchange-traded funds (ETFs), a stock index is a hypothetical portfolio of securities representing a specific market, such as mid-, large- or small-cap. The term “cap” refers to market capitalization, which is calculated by multiplying a company’s stock price by its total number of outstanding shares.
- There are various indexes that track mid-cap stocksincluding the Russell Midcap and the S&P Mid-Cap 400.
- While there’s no hard definition of what qualifies as a mid-cap stock, the S&P classified these stocks as those with market caps between $400 million and $2 billion
- Top ETFs that track the mid-cap space include the iShares Core S&P Mid-Cap ETF (IJH) and Vanguard Mid-Cap Index ETF (VO).
What Is a Mid-Cap?
There is no single definition of a mid-cap stock. However, Standard & Poor’s (S&P) defines mid-cap as a market capitalization of $300 million to $4 billion, where a large-cap has a market capitalization of over $4 billion and small-caps have market caps under $300 million.
Investors interested in diversifying their portfolios beyond big stocks can use the mid- and small-cap indexes to help determine how small, medium and large companies are performing as a whole. An investor can also use an index as a benchmark for looking at the performance of a specific stock in comparison to other stocks in the same class.
Other indexes track very large (mega-cap) and very small (micro-cap) stocks. Indexes can also be used for tracking securities based on other criteria aside from size. Indexes are available for foreign investments and the bonds market, for example.
Investing in Mid-Cap Indexes
Certain investment management companies offer ETFs that track these indexes. These are the best investments for investors looking to get a broad range of exposure to the mid-cap space.
iShares Core S&P Mid-Cap ETF (IJH)
The iShares Core S&P Mid-Cap ETF (IJH) tracks the S&P MidCap 400 Index. The IJH has 400 holdings, with its top three being Domino’s Pizza (DPZ), Teledyne Technologies (TDY), and Tyler Technologies (TYL). Its top-weighted sectors include financials and industrials. The ETF has returned an annualized 8.96% over the last five years. Its expense ratio is a low of 0.6%.
Vanguard Mid-Cap Index ETF (VO)
The Vanguard Mid-Cap Index ETF (VO) tracks the CRSP US Mid Cap Index. It has 340 holdings, with Newmont Corp. (NEM), Centene Corp. (CNC), and TransDigm Group (TDG) being its top three holdings. VO’s expense ratio is 0.4%.
iShares Russell Mid-Cap ETF (IWR)
The iShares Russell Mid-Cap ETF (IWR) tracks the Russell MidCap Index. It has 800 holdings and an expense ratio of 0.19%. Its top three holdings are Fiserv (FISV), Global Payments (GPN), and Advanced Micro Devices (AMD). The fund owns roughly the 200th through the 1000th largest firms in the Russell 2000 index.