It certainly doesn’t take a market expert to tell you where equity investors largely saw the best results in 2024. For many investors, mega cap tech stocks within the Magnificent 7 paved the way for returns this year. Many of the companies within the Mag 7 remain key players in the world of artificial intelligence and cloud computing.
Some experts are betting that the Mag 7 will continue to usher in tremendous growth next year. These predictions are buoyed by expectations that the next presidential administration will promote lower antitrust regulations in favor of higher growth.
However, investors would be wise not to solely hedge their bets on large caps, especially within the Mag 7. Even with the terrific performance that many of these companies have seen, experts remain wary of overconcentration risk.
Should the Mag 7 undergo a correction in 2025, many stock strategies and ETFs could see a significant pullback. As such, it remains prudent to seek a more diversified equity portfolio.
Branching Out
Among equities, one potentially advantageous means to diversify lies in mid caps. Much like other equities, mid caps are in a particularly strong position to benefit from lower interest rates and a pro-growth agenda.
That being said, mid caps can offer distinctive advantages over both small and large cap equities. On the aspect of diversification, mid caps can offer potentially lower correlation to the Mag 7 than many large cap strategies. Meanwhile, should inflation make a comeback next year, mid caps may be at significantly less risk than the more volatile small caps.
Mid Cap ETFs Offer Strong Results
Through the use of the ETF wrapper, investors can tack a wide variety of mid cap strategies into their portfolio. One such fund is the John Hancock Multifactor Mid Cap ETF (JHMM ).
JHMM offers access to a broadly diversified portfolio of mid caps, each chosen to capitalize on opportunities within the market. The fund screens for a variety of attractive factors, such as lower relative price and higher profitability, to cultivate a portfolio positioned to outperform in the long term.
Even though 2024’s equity rally was dominated by mega caps, JHMM put up highly competitive results. As of September 30th, 2024, the fund’s NAV has risen 28% over the last twelve months.
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