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Some investors may think that because mid-cap stocks are smaller than large- and mega-cap stocks, paying up for higher fee actively managed mutual funds to access this asset class. Data don't confirm that notion.
The $51.36 billion iShares Core S&P Mid-Cap ETF (NYSE:IJH) is the largest mid-cap ETF and charges just 0.07% per year, or $7 on a $10,000 investment. However, cost-effective is just one of IJH's favorable traits.
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“The average mid-cap core mutual fund rated by CFRA generated a 10.3% three-year annualized total return as of November 1, lagging the 11.7% return for iShares Core S&P Mid-Cap ETF (IJH),” CFRA Research Director of ETF & Mutual Fund Research Todd Rosenbluth said in a recent note. “The collective performance was hurt by charging on average a 1.2% net expense ratio (IJH charges just 0.07), but also by stock selections.”
Why It's Important
Mid-cap stocks are often dubbed the forgotten or overlooked segment of the equity market, but historical data confirm the group's utility. Over long holding periods, mid-cap stocks often outperform large-cap stocks by sizable margins while offering less volatility than small-cap stocks.
“Despite a strong combination of growth and stability traits that should garner significant interest, mid-cap stocks remained under the radar,” Rosenbluth said.
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Some data points suggest investors are warming to mid-cap ETFs. For example, IJH, which tracks the S&P MidCap 400 Index, has seen 2019 inflows of $1.19 billion.
What's Next
IJH allocates over a third of its weight to industrial and financial services stocks, giving it a cyclical fee. Adding to that cyclical bias with a growth tilt is the fund's nearly 28% combined weight to technology and consumer discretionary stocks.
Those sector leanings due create higher volatility; IJH's three-year standard deviation is almost 500 basis points higher than the S&P 500's. However, mid-cap stocks' often deliver superior risk-adjusted returns relative to their larger peers, rendering the higher volatility a moot point.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.