While there isn’t a hard-and-fast rule that determines whether a company is a small cap, mid cap, or large cap, these are the general guidelines for differentiating ETFs, using market value:
Micro cap: Less than $250 millionSmall cap: $250 million to $2 billionMid cap: $2 billion to $10 billionLarge cap: $10 billion or more
Market cap can be used as a relative indicator of a company’s stability and growth potential. In general, large-cap businesses are established and stable, with less opportunity for explosive growth. Small caps are newer companies that can be more volatile but have room to grow. Mid caps offer a mixture of these characteristics, making them an option for investors who want an investment that’s more stable than small-cap businesses, but still have strong growth potential. We built this list of the five best mid-cap funds, listed in no particular order, by reviewing dozens of funds and considering factors such as:
Expense ratio Assets under management (AUM) Historical returns Liquidity
Vanguard is one of the largest financial companies in the world with more than $7.2 trillion in global assets under management. This means investors won’t need to worry about liquidity should they want to buy or sell shares. As a passively managed fund, the ETF has a low expense ratio of 0.06%, equivalent to $0.60 for each $1,000 invested, making it a great choice for people who want to invest without paying large fees. However, the fund includes exposure to small-cap and mid-cap stocks, so those looking exclusively for mid-cap investments should look elsewhere. The fund has matched its benchmark incredibly well since its inception in 2004, trailing the Spliced Mid-Cap Index it is based on by just 0.04%—equivalent to its expense ratio or $0.40 for every $1,000 invested. It has trailed the benchmark by a slimmer margin of 0.02% in the past three years. The fund has a relatively low expense ratio of 0.24%, equivalent to $2.40 for each $1,000 invested. Its three-year return of 22.13% trails its benchmark by less than the fund’s expense ratio, meaning it does a good job of following the index. With nearly 140 million shares outstanding and more than $15 billion under the fund’s management, investors won’t have to worry about liquidity when buying and selling shares. The ESG focus of the fund can have benefits and drawbacks. Some feel that ESG investing causes people to miss out on important companies that don’t meet ESG criteria, while other experts believe that ESG investing is likely to outperform the market as a whole. The fund has tracked its index fairly well over the past three years, returning 22.18% compared to the index’s 22.99%. It also has a reasonable expense ratio of 0.40%, equal to $4 for every $1,000 invested. That being said, there is only $355.1 million in the fund, which is not a large amount. Because of this, some investors may worry about liquidity if they need to sell shares. The fund has a reasonable expense ratio of 0.38%, equivalent to $3.80 for every $1,000 invested. It also has about $3.0 billion in assets under management, so investors won’t have to worry about liquidity when they want to buy and sell shares.
Are Mid-Cap ETFs Right for Me?
Mid-cap ETFs focus on investing in medium-sized businesses. If you are an investor looking to diversify your portfolio, these stocks may be a good option for you. In general, mid-cap stocks are viewed as slightly less stable than large caps while offering more growth potential. Investors may experience more volatility with mid caps, so they must have a long-term investing plan when focusing on mid caps.
The Bottom Line
Mid-cap ETFs are funds that invest in businesses with market capitalization between roughly $2 billion and $10 billion. These companies offer a mixture of growth potential and stability that may be valuable for investors who don’t want to accept the volatility of small caps, but who want more growth than large-cap funds.
What are mid-cap ETFs?
Mid-cap ETFs are exchange-traded funds that invest primarily in mid-cap companies. Mid-cap companies are those with a market capitalization between roughly $2 billion and $10 billion.
How can I invest in mid-cap ETFs?
The best way to invest in a mid-cap ETF is through a brokerage account. You’ll find that many brokerages, like Vanguard, offer mid-cap ETFs, which makes it easy to get started. You might also consider using an investing app to buy shares in one of the dozens of mid-cap ETFs on the market.
When should I buy ETFs?
When to buy any investment is a personal decision that you have to make for yourself after thinking about your goals and investing timeline. Mid-cap ETFs are often more volatile than large-cap funds, so it is often better if you have a long-term investing goal rather than a short one if you want to invest in mid caps. You may also consider seeking advice from a financial advisor to help make your investing decisions. The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.
