When it comes to small-cap investing, it can be difficult to hit a home run. However, mid-cap exposure can make for hittable plays, giving investors an opportunity to get exposure to companies that may have a higher chance of breaking through the large-cap ceiling.
“Recognizing those future winners when they are still in the small-cap phase is extremely challenging,” a Motley Fool article said. “However, they can be a bit easier to spot once they’ve become mid-cap stocks, with market caps in the $2 billion to $10 billion range. Obviously, nobody can guarantee any such company will lead its industry segment or become a multi-bagger.”
Mid-caps also offer the ideal blend of performance and stability. Because they’re better capitalized than their small-cap brethren, they can withstand economic downturns better while also seeing upside when markets rally.
Short-term traders can also capitalize on mid-cap rallies. This is made possible using the (MIDU ), which seeks daily investment results equal to 300% of the daily performance of the S&P MidCap 400 Index.
Leveraged funds can provide traders with strategic exposure to niche corners of the market like mid- and small-caps without having to use a margin account to maximize gains. However, only seasoned market players should utilize them.
A Small-Cap Option
Small-cap stocks aren’t behind mid-caps in the current market rally, as seen in the performance of the Russell 2000 index. It’s up almost 13%, but it could make a larger move if the second half of 2023 continues to see additional upside.
Short-term traders can track this move with the (TNA ). The fund tracks the Russell 2000 Index, which seeks daily investment results equal to 300% of the daily performance of the index.
The tide could turning for small-caps after relative underperformance amid rising interest rates and high inflation. They could be in a price range that’s conducive to value seekers.
“About 88% of unusually large volume purchases in domestic equities from June 1 through June 28 went into small caps according to MAPsignals, after 1,512 buy signals for equities under $50 million,” Financial Advisor noted. “Despite many advisors’ indifference to small-caps, the category’s valuations are currently below their 25-year averages, while large-caps’ are well above theirs.”
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