With the market landscape caught up in interesting times with the Covid-19 pandemic and a forthcoming presidential election, investors need to shore up their portfolios with equities other than simply large cap exposure. That’s where midcap companies come into play—a middle-of-the-ground option with the stability of large caps and the growth opportunity of small caps.
One such fund to consider to get core exposure in midcaps is the iShares Core S&P Mid-Cap ETF (IJH ). IJH seeks to track the investment results of the S&P MidCap 400 (the “underlying index”), which measures the performance of the mid-capitalization sector of the U.S. equity market.
The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. It may invest the remainder of its assets in certain futures, options and swap contracts, cash and cash equivalents, as well as in securities not included in the underlying index, but which the advisor believes will help the fund track the underlying index.
In short, IJH offers investors:
- Exposure to U.S. mid-cap stocks
- Low cost and tax efficient
- Use at the core of your portfolio to seek long-term growth
In a time where cost is just as important as gains, IJH comes with a low .05% expense ratio.
Why Get Midcap Exposure?
Sounds all well and good, but investors want to know exactly why midcaps are worth a look. With that, it’s important to get a bit of a primer on midcaps with help from the folks at Investopedia.
“Mid-cap (or mid-capitalization) is the term that is used to designate companies with a market cap (capitalization)—or market value—between $2 and $10 billion,” Investopedia explained. “As the name implies, a mid-cap company falls in the middle between large-cap and small-cap companies. Classifications, such as large-cap, mid-cap, and small-cap are approximations of a company’s current value; as such, they may change over time.”
Investopedia also delved more into the advantages of midcaps, saying “there are many advantages to mid-cap companies that investors may want to consider. When interest rates are low and capital is cheap, corporate growth is generally stable. Mid-cap companies typically can get the credit they need in order to grow, and they do well during the expansion part of the business cycle.”
“Mid-caps are not as risky as small-cap companies, which means they tend to do relatively well financially during times of economic turbulence,” Investopedia added. “In addition, many mid-caps are well known, are often focused on one specific business, and have been around long enough to make a niche in their target market. And finally, because they are riskier than large caps, they may have a higher return, which could be more appealing to a less risk averse investor’s bottom line.”