5 Best Mid-Cap ETFs for 2021
Look to mid-cap ETFs for a mix of stability and growth potential
Mid-cap exchange-traded funds, or ETFs, are ETFs—a type of investment security that groups assets together and passively tracks an underlying benchmark index—that invest primarily in medium-sized companies. To determine a company’s size, most companies and investors use market capitalization (market cap), which is a measure of a company’s overall value. To find a company’s market cap, you multiply its share price by the number of shares outstanding.
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 million
- Small cap: $250 million to $2 billion
- Mid cap: $2 billion to $10 billion
- Large cap: $10 billion or more
Very large, stable companies, especially those with steady dividends, are often called blue chips. In general, all blue-chip companies are considered large caps, but not all large caps are considered blue chips.
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:
|ETF Name||AUM (as of July 26, 2021)||Expense Ratio||Inception Date|
|Vanguard Extended Market ETF||$114.5 billion||0.06%||Dec. 27, 2001|
|Vanguard Mid-Cap ETF||$151.1 billion||0.04%||Jan. 26, 2004|
|iShares Russell Mid-Cap Growth ETF||$15.9 billion||0.24%||July 17, 2001|
|Nuveen ESG Mid-Cap Growth ETF||$355.1 million||0.40%||Dec. 13, 2016|
|WisdomTree U.S. Mid-Cap Dividend Fund||$3.0 billion||0.38%||June 16, 2006|
Vanguard Extended Market ETF
- 3-year return (as of July 26, 2021): 18.63%
- Expense ratio: 0.06%
- Assets under management (AUM) (as of July 26, 2021): $114.5 billion
- Inception date: Dec. 27, 2001
The Vanguard Extended Market ETF is a passively managed fund that aims to track the Spliced Extended Market Index, which is designed to track the performance of both small- and mid-cap companies. In short, it focuses on businesses that aren’t in some of the major large-cap indexes, such as the S&P 500.
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.
Vanguard Mid-Cap ETF
- 3-year return (as of July 26, 2021): 16.49%
- Expense ratio: 0.04%
- Assets under management (AUM) (as of July 26, 2021): $154.1 billion
- Inception date: Jan. 26, 2004
If you like the idea of investing in a low-cost, passively managed fund, but you want to invest exclusively in mid-cap companies, the Vanguard Mid-Cap ETF is a solid choice. It focuses purely on medium-sized companies and has enough assets under management to keep expenses low and liquidity high.
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.
iShares Russell Mid-Cap Growth ETF
- 3-year return (as of July 26, 2021): 22.13%
- Expense ratio: 0.24%
- Assets under management (AUM) (as of July 26, 2021): $15.9 billion
- Inception date: July 17, 2001
The iShares Russell Mid-Cap Growth ETF is a fund that focuses on investing in mid-cap businesses that are poised to grow at a higher rate than the rest of the market. This means that the fund is likely to exclude some of the more stable mid-cap businesses in favor of those focusing on major expansion efforts.
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.
Nuveen ESG Mid-Cap Growth ETF
- 3-year return (as of July 26, 2021): 24.18%
- Expense ratio: 0.40%
- Assets under management (AUM) (as of July 26, 2021): $355.1 million
- Inception date: Dec. 13, 2016
The Nuveen ESG Mid-Cap Growth ETF is a fund that focuses on medium-sized companies that are poised to grow at a greater rate than other companies. In addition, the fund also has a focus on Environmental, Social, and Governance (ESG) investing.
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.
WisdomTree U.S. Mid-Cap Dividend Fund
- 3-year return (as of July 26, 2021): 8.26%
- Expense ratio: 0.38%
- Assets under management (AUM) (as of July 26, 2021): $3.0 billion
- Inception date: June 16, 2006
The WisdomTree U.S. Mid-Cap Dividend Fund is an ETF that focuses on medium-sized companies that also pay a dividend. While dividends are typically a hallmark of large-cap companies, many medium-sized businesses also pay dividends. Investors who want exposure to that portion of the market while generating income from their portfolio will appreciate this fund.
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.
Pros and Cons of Investing in Mid-Cap ETFs
- Provide a mixture of stability and growth potential
- Diversification can reduce some risks of mid-cap companies
- Less stable than large caps
- Mid-cap companies may be less liquid than large caps
- Provide a mixture of stability and growth potential: Investors often use market cap as an indicator of growth potential and stability. Large caps have less growth potential but are stable. Small caps are volatile but can grow. Mid caps give investors an in-between option.
- Diversification can reduce some risks of mid-cap companies: Mid-sized companies are often at higher risk of failure than larger companies and blue chips. ETFs make it easy to diversify your investment across hundreds or thousands of companies, reducing the impact on your portfolio if one fails.
- Less stable than large caps: Large-cap companies are more established than mid caps and therefore are much more stable. Large caps are often considered better equipped to handle economic downturns and experience less price volatility. Investing in mid caps may mean you have to wait through periods of volatility before realizing a profit, which may not appeal to some investors.
- Mid-cap companies may be less liquid than large caps: This is simply because there are fewer shares available to trade—which can make it harder for fund managers to buy and sell shares as needed to manage the portfolio.
Historical Performance Trends
Many factors can influence the performance of a mid-cap ETF. Mid caps are medium-sized companies that are generally aiming to grow into larger businesses. However, many of them are still in vulnerable stages. This means they could be significantly hurt by a market downturn.
Over the past decade, mid-cap stocks have underperformed compared to large and small caps, but this hasn’t always been the case. Investors need to consider market conditions and expectations for the future when deciding whether to invest in a mid-cap fund.
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.
Frequently Asked Questions (FAQs)
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.