Midcaps, especially those with a growth factor skew, are having a strong 2025 so far. Given this, investors may want to consider tilting toward exposure to midcap equities.
Midcaps strike the perfect balance between small-cap growth and large-cap stability. Right now, it’s the former that’s helping to propel midcaps.
“Mid-cap growth funds have started 2025 with a bang, posting the highest returns of all Morningstar Style Box categories,” wrote Morningstar’s Bella Albrecht. “The average mid-cap growth fund has gained 6.5% this year, beating the return on the overall stock market by nearly 2 percentage points.”
Strong mid-cap performance hasn’t been isolated to just year-to-date performance. When widening the aperture to a one-year time frame, midcaps have also exhibited strong performance.
“Over the last 12 months, mid-cap growth funds have returned 17.85%. On an annualized rate, they have returned 8.03% over the last three years and 9.03% over the last five,” Albrecht explained. “That compares with the Morningstar US Market Index, which has returned 23.76% over the last 12 months, 13.32% per year over the last three years, and 13.94% per year over the last five years.”
An Active Midcaps Option
In the current market environment, there’s a lot of uncertainty with macroeconomic factors like interest rate policy and geopolitical factors like tariffs to take into account. As such, having active exposure to a fund is ideal and a feature component of the Avantis U.S. Mid Cap Equity ETF (AVMC ). An investor looking for midcap exposure, but not certain where to start, this is an ideal place.
Active management allows the fund to tap into the knowledge of experienced portfolio managers from Avantis. They can adjust holdings based on current market conditions, allowing for flexibility in volatile times as opposed to their passive fund peers.
The fund is well-diversified, carrying over 500 holdings spread across over $150 million in holdings as of February 21. As such, investors get a broad exposure range cross various business sectors.
From a strategic standpoint, AVMC focuses on those midcap companies that are trading at lower valuations with high profitability ratios. That value-to-profitability ratio allows for greater upside potential.
Efficient portfolio management and trading process designed to enhance returns while focusing on reducing unnecessary risks and costs for investors.
For cost-conscious investors, they can squash the notion that all active funds are too expensive. While expensive could mean different things to different investors, AVMC carries a relatively low expense ratio of 0.18%.
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