3 Mid-Cap ETFs to Buy and Hold

Mid-cap ETFs provide investors with an excellent balance of performance, risk, and expenses and should be a substantial part of most long-term investment portfolios.

Feb 19, 2014 at 6:20PM

Buy and hold: It may not be new or exciting, but it's reliable, and it'll get you where you need to go. It's the Toyota Camry of investment philosophies.

Buying and holding is an excellent strategy for most investors, especially for most long-term accounts, retirement or otherwise. Buying and holding allows investors to save a small fortune in fees. More importantly, as many investors would rather watch paint dry than spend their leisure time managing their money, buying and holding ETFs (which by design track certain market indexes) can be a winning strategy for hands-off investors.

The case for mid-caps

Camry

Buy and hold: the Toyota Camry of investment philosophies, made even more exciting with the bold use of beige. Source: Wikimedia user IFCAR.

Large-cap stocks always garner a lot of attention because they are the companies that are most visible in our everyday lives. There are piles of historical data relating to large-cap performance. Small-cap stocks, on the other hand, are attractive if an investor can stomach the volatility because of their high earning potential.

Mid-caps, however, often go overlooked when compared to their larger and smaller counterparts. Mid-cap ETFs, however, have outperformed large-cap ETFs in the last one-year, three-year, five-year, and 10-year periods. While small caps usually outperform mid-caps in the long-term, mid-caps offer less volatility.

For investors who have a long time horizon, tipping your asset allocation in favor of more mid-cap exposure may strike the perfect balance between volatility and return.

Consider these 3 mid-cap ETFs
Schwab U.S. Mid-Cap ETF
(NYSEMKT:SCHM)This fund is a top pick for investors who are looking to add more mid-cap exposure to their portfolio. Nearly 93% of the fund is allocated to mid-cap stocks, with the rest allocated to small-cap stocks. This ETF is a tremendous value with a 0.07% expense ratio and 25% turnover. Because of its relatively pure asset-allocation, this ETF would be a good candidate for investors attempting to assemble a simple, long-term portfolio of three to five ETFs. This ETF is also a good candidate for investors attempting to replace large-cap ETFs without gaining too many duplicative holdings.

Vanguard S&P Mid-Cap 400 ETF (NYSEMKT:IVOO)This fund is an excellent choice for investors who can handle more volatility. The Vanguard S&P Mid-Cap 400 ETF has 75% mid-cap holdings and 25% small-cap holdings. The additional small-cap exposure will increase the fund's overall return in the long-term. Investors should be aware that greater small-cap exposure usually results in additional volatility, however.

This ETF is also an excellent value with a 0.15% expense ratio and an exceptionally low 10% turnover. Investors should note, however, that this ETF trades at a volume approximately one-tenth of the Schwab U.S. Mid-Cap ETF. As with any lightly traded ETF, investors could be hit with giant bid-ask spreads.

iShares Mid-Cap Index Fund (NYSEMKT:IWR)This fund is a monster with nearly $9.4 billion in total assets. iShares Mid-Cap Index Fund is much more liquid then Vanguard S&P Mid-Cap 400 ETF, which means investors need not fear a giant bid-ask spread. This fund is ideal for investors who already have exposure to the Russell 2000 index and are looking to add more mid-cap exposure.

Investors should be aware that this fund has a lot of exposure to large-cap stocks, which are weighted at 31.62%. Investors with a large amount of exposure to S&P 500 index funds will find that this fund has a lot of overlap. Investors looking for this specific mid-cap exposure, however, will appreciate the reasonable fees of 0.22% and a low turnover of 13%.

The No. 1 Way to Lose Your Wealth Without Even Knowing It
You’ve fought hard to build wealth for you and your family. Yet one all-too-common pitfall could completely derail your dreams before you even know it. That's why a company The Economist hails as "an ethical oasis" has isolated five simple questions you must answer to ensure that your financial future is really secure.

Can you answer YES to all five of these eye-opening questions?
Click here to find out -- before it’s too late!

Melinda Melendez has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers