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Many investors overlook mid-cap stocks, partly because they’re not as financially stable as large-cap stocks and partly because they’re not growing as quickly as small-caps. But mid-cap stocks offer a mix of both – solid growth and financial stability. If you don’t want the hassle of investing in individual stocks, you can gain exposure to mid-cap stocks through an ETF.
What is a mid-cap ETF?
A mid-cap ETF is an exchange-traded fund that invests in the market’s mid-size companies, where the total value of the company’s stock ranges from a few billion dollars to $20 billion or so. Mid-cap ETFs are a great way to own the companies that are growing quickly and have good financial stability without having to analyze individual stocks and picking the winners.
The mid-caps include plenty of companies that you haven’t heard of as well as quite a few that you may use in your daily life. And the best of the mid-cap stocks will continue to grow larger, ultimately becoming large-caps and multiplying your initial investments many times over.
Mid-cap companies may be popular with investors for a few reasons:
- Growth: Mid-cap businesses are still small enough that they offer above-average growth and sometimes well above-average, as many mid-caps go on to become large-caps.
- Increasing financial stability: Along with their increasing size comes greater financial stability and resources, making mid-caps more secure than small-caps though not as secure as large-caps or the mega-cap companies such as Apple and Amazon.
- Defensive businesses: Mid-cap companies have typically grown to become large enough that they’re able to defend a business niche, increasing their overall safety.
- Less volatility: Because they’re more secure, mid-caps tend to have less volatility than their smaller rivals, making them a bit better for risk-averse investors.
Those are great positives for investors, but if you have no interest in investing yourself and don’t want to do the legwork of research and analysis, a great place to begin is buying a mid-cap ETF. (And here are the best small-cap ETFs and best large-cap ETFs based on their overall returns.)
Top-performing mid-cap ETFs
Bankrate selected its top funds based on the following criteria:
- U.S. funds that appear in ETF.com’s screener for mid-caps
- Funds among the top performers over the last five years
- No inverse or leveraged ETFs
- Performance measured on Oct. 31, 2024, using the most recent figures from Morningstar
Invesco S&P MidCap Quality ETF (XMHQ)
This passively managed fund is based on the S&P MidCap 400 Quality index, which includes 80 stocks from the S&P MidCap 400 index that score well for quality businesses.
- 2024 YTD performance: 18.4 percent
- Historical performance (annual over 5 years): 16.8 percent
- Expense ratio: 0.25 percent
Invesco S&P MidCap Momentum ETF (XMMO)
This passively managed fund is based on the S&P MidCap 400 Momentum index, which includes 80 stocks in the S&P MidCap 400 index with the highest momentum scores.
- 2024 YTD performance: 36.8 percent
- Historical performance (annual over 5 years): 16.7 percent
- Expense ratio: 0.34 percent
Invesco S&P MidCap 400 Revenue ETF (RWK)
This fund tracks the S&P 400 MidCap 400 Revenue-Weighted index, which includes stocks in the S&P 400 MidCap index reweighted according to the company’s revenue.
- 2024 YTD performance: 12.2 percent
- Historical performance (annual over 5 years): 15.0 percent
- Expense ratio: 0.39 percent
Invesco S&P MidCap 400 Pure Value ETF (RFV)
This passively managed fund is based on the S&P MidCap 400 Pure Value index, which includes stocks in the S&P MidCap 400 index that score well for value characteristics such as low price-to-book value, low price-to-earnings ratio and low price-to-sales ratio.
- 2024 YTD performance: 4.0 percent
- Historical performance (annual over 5 years): 14.8 percent
- Expense ratio: 0.35 percent
Invesco S&P MidCap 400 GARP ETF (GRPM)
This passively managed fund tracks the S&P MidCap 400 GARP index. The index — whose GARP name stands for “growth at a reasonable price” — includes stocks that screen well for consistent growth, reasonable valuation, strong earnings power and solid financials.
- 2024 YTD performance: 19.1 percent
- Historical performance (annual over 5 years): 13.9 percent
- Expense ratio: 0.35 percent
Franklin U.S. Mid Cap Multifactor Index ETF (FLQM)
This fund tracks the LibertyQ U.S. Mid Cap Equity index, which includes stocks based on business quality, value, momentum and low volatility. This fund aims for stocks that have low downside and that can provide attractive long-term risk-adjusted returns.
- 2024 YTD performance: 15.6 percent
- Historical performance (annual over 5 years): 12.8 percent
- Expense ratio: 0.30 percent
Invesco S&P MidCap Value With Momentum ETF (XMVM)
This passively managed fund tracks the S&P MidCap 400 High Momentum Value index, which includes 80 stocks from the S&P MidCap 400 index that have the highest scores for both value and momentum factors.
- 2024 YTD performance: 13.6 percent
- Historical performance (annual over 5 years): 12.7 percent
- Expense ratio: 0.39 percent
Bottom line
Mid-cap ETFs are an attractive way to invest in solid performers that have both growth and stability — and to do so without the risks of buying into individual stocks. While an ETF can help diversify the risk of buying a few individual stocks, it won’t eliminate all the risk of investing.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
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