9 of the best mid-cap ETFs to buy

Investors often miss the middle ground when selecting companies for their portfolio.

  • By Jeff Reeves,
  • U.S. News & World Report
  • – 04/24/2019
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Many investors overlook the middle category of publicly traded stocks that are neither too massive nor too small – mid-cap companies that typically are valued between $2 billion and $10 billion.

Some folks view these stocks as the ideal opportunity for both growth and stability, with deep enough pockets to no longer be called start-ups but still small enough they have a long way to grow.

If you're looking to invest in this middle ground of mid-cap stocks, here are nine different exchange-traded funds that can provide easy access.

Vanguard Mid-Cap Value ETF

The largest dedicated mid-cap fund by value, VOE has nearly $10 billion in assets under management. As the name implies, it is a value-oriented fund that holds investments with attractive valuations based on metrics such as their current price to book value. And as is typical, this strategy tends to bias toward asset-rich sectors such as financials, with stocks such as M&T Bank Corp. (MT) representing the top market segment at more than 23% of the ETF's portfolio at present. Still, with a little over 200 individual stocks it remains pretty diversified. Vanguard also sticks to its low-cost strategy here with annual expenses of just 0.07% or $7 on every $10,000 invested.

WisdomTree US MidCap Dividend ETF

Another popular choice is this dividend-focused WisdomTree ETF, a nearly $4 billion fund that holds about 400 different mid-sized corporations. Collectively, the portfolio offers a dividend yield of 2.8% at present – moderately better than the popular S&P 500 large-cap index (.SPX), which only offers about 2% yield. Note that about 20% of the portfolio is in consumer discretionary and retail names like Victoria's Secret parent L Brands (LB) or Kohl's Corp. (KSS). Many of these stocks are established players that offer decent dividends but still face e-commerce challenges. This isn't necessarily a bad thing – but keep in mind a big portion of this ETF's portfolio can suffer cyclical risks if consumer spending dries up.

SPDR Russell 1000 Yield Focus ETF

A more targeted dividend ETF, this SPDR fund is benchmarked to the Russell 1000 index (.RUI) of mid-cap stocks and then applies a smart beta screening technique to pick those with the biggest income potential. The result is a smaller overall portfolio, with only about 270 holdings, and a total yield of 3.3%. The bias is again toward retail names and financials, with the two sectors making up about 40% of the fund’s portfolio. But the dividend potential beats that of many large cap funds – and even many dividend-focused ETFs, too.

WisdomTree US MidCap Earnings ETF

If you prefer to go after the growth potential of mid-cap stocks instead of value or dividends, then consider the EZM fund that focuses on "profitable companies" that can consistently deliver attractive earnings. If you're looking for companies in the middle range of the market with upside potential, this is an interesting way to filter out those who aren't as focused on the bottom line. That strategy gives this WisdomTree fund a different bent, with industrial stocks such as chemicals company Chemours Co. (CC) or tire manufacturer Goodyear Tire and Rubber Co. (GT) representing the biggest market segment; the sector makes up about 20% of the portfolio.

Pacer Trendpilot US Mid Cap ETF

One of the most unique mid-cap investment funds is the Pacer Trendpilot fund that allocates your money to middle valuation stocks when the market is favored based on technical indicators – and when it's not, instead allocates its portfolio 50% or more into rock-solid U.S. Treasury bonds. This philosophy may not sit well with buy-and-hold proponents who simply want to take what the market gives them. But considering how some investors are worried that a looming downturn in corporate earnings and an economic slowdown could undercut the market, the peace of mind may be worth it if you're concerned with protecting profits as much as chasing growth.

DeltaShares S&P 400 Managed Risk ETF

Another choice on the mid-cap menu is this DeltaShares ETF that has an eye for risk-adjusted returns, looking to avoid volatility as much as post long-term gains. Benchmarked to the S&P 400 index (.MID) of mid-sized U.S. corporations, it also has the ability to increase or decrease allocations to short-term Treasury bonds. DMRM isn't as quick to throw on the brakes as the aforementioned Pacer ETF. This ability to only dabble in bonds may be more attractive to those who want just a hint of Treasurys for stability instead of a fund that abandons mid-caps altogether in times of perceived trouble.

First Trust Mid Cap Core AlphaDEX Fund

This AlphaDEX fund uses an "enhanced" index that ranks stocks in the Nasdasq 600 mid-cap index according to selective criteria including value to price, cash flow and return on assets. The ETF then weeds out the bottom quarter or stocks based on these metrics and keeps roughly 450 of the investments it deems to be at the top of the mid-cap universe. The holdings are pretty equally weighted, with no single investment making up more than about 0.4% of the portfolio and four different sectors all ranking between 15% and 18% of the total holdings. That leads to a much more diversified list of holdings than many other mid-cap funds.

Invesco Zacks Mid-Cap ETF

An even more selective fund is this Invesco ETF that picks the top 100 mid-sized stocks based on the screening criteria of investment research firm Zacks, known for its screening tools that rank stocks based on value, growth and momentum metrics. This mid-cap fund is comprised only of the picks that are the very best according to the research. It makes for an eclectic portfolio, including names you may know such as Discover Financial Services (DFS) as well as lesser-known mid-caps such as industrial company Parker-Hannifin Corp (PH) that manufacturers motion control sensors. But with year-to-date gains of more than 18%, there seems to be something working in the Zacks screening process.

Invesco Russell MidCap Equal Weight ETF

Last on the list of mid-cap ETFs is the EQWM fun from Invesco that is an equal-weight fund that holds a massive list of 770 middle-sized U.S. corporations. That ensures no single company represents an outsized piece of the strategy and investors can tap into nearly every available opportunity in the mid-cap space. That includes some bigger-than-expected names such as Conagra Brands (CAG) or J.M. Smucker Co. (SJM) but also plenty of stocks that are $1 billion or smaller in market capitalization. If you want to cast a wide net on this asset class, then this Invesco ETF may be right for you.

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