Should Vanguard Mid-Cap ETF (VO) Be on Your Investing Radar?

If you're interested in broad exposure to the Mid Cap Blend segment of the US equity market, look no further than the Vanguard Mid-Cap ETF VO, a passively managed exchange traded fund launched on 01/26/2004.

The fund is sponsored by Vanguard. It has amassed assets over $63.11 billion, making it one of the largest ETFs attempting to match the Mid Cap Blend segment of the US equity market.

Why Mid Cap Blend

Mid cap companies, with market capitalization in the range of $2 billion and $10 billion, offer investors many things that small and large companies don't, including less risk and higher growth opportunities. Thus, companies that fall under this category provide a stable and growth-heavy investment.

Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.04%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.52%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 18% of the portfolio. Information Technology and Financials round out the top three.

Looking at individual holdings, Amphenol Corp APH accounts for about 0.85% of total assets, followed by Arthur J Gallagher & Co AJG and Motorola Solutions Inc MSI.

The top 10 holdings account for about 5.62% of total assets under management.

Performance and Risk

VO seeks to match the performance of the CRSP US Mid Cap Index before fees and expenses. The CRSP US Mid Cap Index targets inclusion of the U.S. companies that fall between the top 70%-85% of investable market capitalization.

The ETF has added roughly 6.10% so far this year and is up about 24.20% in the last one year (as of 03/25/2024). In the past 52-week period, it has traded between $195.66 and $247.32.

The ETF has a beta of 1.08 and standard deviation of 18.78% for the trailing three-year period, making it a medium risk choice in the space. With about 338 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard Mid-Cap ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VO is an excellent option for investors seeking exposure to the Style Box - Mid Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares Russell Mid-Cap ETF IWR and the iShares Core S&P Mid-Cap ETF IJH track a similar index. While iShares Russell Mid-Cap ETF has $32.61 billion in assets, iShares Core S&P Mid-Cap ETF has $83.50 billion. IWR has an expense ratio of 0.19% and IJH charges 0.05%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

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