Many investors tend to overlook mid-cap stocks, as they are neither as financially stable as large-cap stocks nor growing as quickly as small-caps. However, mid-cap stocks strike a balance, offering a blend of solid growth and financial stability. If you prefer not to invest 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 mid-sized companies, where the total value of the company’s stock ranges from a few billion dollars to around $20 billion. Mid-cap ETFs offer a way to own companies that are growing quickly and have solid financial stability without having to analyze and pick individual stocks.
Mid-cap stocks include a mix of lesser-known companies and familiar names that you might use daily. The best mid-cap stocks will continue to grow, eventually becoming large-caps and multiplying your initial investments.
Investors are drawn to mid-cap companies for several reasons:
- Growth: Mid-cap businesses are still small enough to offer above-average growth. Many mid-caps go on to become large-caps.
- Increasing financial stability: As they grow, mid-caps gain greater financial stability and resources, making them more secure than small-caps but not as secure as large-caps or mega-cap companies like Apple and Amazon.
- Defensive businesses: Mid-cap companies are often large enough to defend a business niche, enhancing their overall safety.
- Less volatility: Due to their increased security, mid-caps tend to be less volatile than their smaller rivals, making them more appealing to risk-averse investors.
While these positives are compelling, if you don’t want to do the legwork of research and analysis, a great way to begin is by 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
The top funds are selected based on the following criteria:
- U.S. funds listed in ETF.com’s mid-cap screener
- Top performers over the last five years
- Excludes inverse or leveraged ETFs
- Performance data as of June 28, 2024, from ETF.com
Invesco S&P MidCap Quality ETF (XMHQ)
This passively managed ETF tracks the S&P MidCap 400 Quality Index, featuring 80 high-quality stocks from the S&P MidCap 400 Index.
- 2024 YTD performance: 15.2%
- Historical performance (annual over 5 years): 17.0%
- Expense ratio: 0.25%
Invesco S&P MidCap Momentum ETF (XMMO)
This passively managed ETF tracks the S&P MidCap 400 Momentum Index, consisting of 80 stocks from the S&P MidCap 400 Index with the highest momentum scores.
- 2024 YTD performance: 27.1%
- Historical performance (annual over 5 years): 15.4%
- Expense ratio: 0.34%
Invesco S&P MidCap 400 Revenue ETF (RWK)
This ETF follows the S&P MidCap 400 Revenue-Weighted Index, reweighting stocks from the S&P MidCap 400 Index based on the company’s revenue.
- 2024 YTD performance: 4.9%
- Historical performance (annual over 5 years): 14.4%
- Expense ratio: 0.39%
Invesco S&P MidCap 400 GARP ETF (GRPM)
This passively managed ETF tracks the S&P MidCap 400 GARP Index, which stands for Growth at a Reasonable Price. The index includes stocks that excel in consistent growth, reasonable valuation, strong earnings power, and solid financials.
- 2024 YTD performance: 16.3%
- Historical performance (annual over 5 years): 13.7%
- Expense ratio: 0.35%
Invesco S&P MidCap 400 Pure Value ETF (RFV)
This passively managed ETF 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-earnings ratio, and low price-sales ratio.
- 2024 YTD performance: -4.2%
- Historical performance (annual over 5 years): 13.1%
- Expense ratio: 0.35%
Franklin U.S. Mid Cap Multifactor Index ETF (FLQM)
This fund tracks the LibertyQ U.S. Mid Cap Equity Index, which selects stocks based on quality, value, momentum, and low volatility. The goal is to invest in stocks with low downside risk that can offer attractive long-term risk-adjusted returns.
- 2024 YTD performance: 6.8%
- Historical performance (annual over 5 years): 12.3%
- Expense ratio: 0.30%
Invesco S&P MidCap Value with Momentum ETF (XMVM)
This passively managed fund follows the S&P MidCap 400 High Momentum Value Index, which comprises 80 stocks from the S&P MidCap 400 Index with the highest combined scores for value and momentum factors.
- 2024 YTD performance: 2.0%
- Historical performance (annual over 5 years): 11.6%
- Expense ratio: 0.39%
In Conclusion
Investing in mid-cap ETFs offers a balanced approach to accessing companies with growth potential and stability, mitigating the risks associated with individual stock purchases while not entirely eliminating investment risks.