5 Best Mid-Cap ETFs for 2023

To find a balance between stability and growth potential, look to mid-cap ETFs. Mid-cap exchange-traded funds, or ETFs, are a subset of exchange-traded funds that invest primarily in medium-sized businesses. ETFs are a class of investment security that pools assets and passively tracks an underlying benchmark index. Most businesses and investors use market capitalization, a gauge of an organization's total worth, to determine the size of a company. A company's market capitalization is calculated by dividing the share price by the total number of outstanding shares. Although there isn't a set formula to determine whether a company is a small, mid, or large cap, the following general rules can be used to distinguish ETFs based on market value:

Less than $250 million is a microcap.
$250 million to $2 billion for small caps
$2 billion to $10 billion in the mid-cap.
$10 billion or more is a large cap.

Note: Blue chips are commonly used to refer to very big, dependable companies, especially those that consistently pay dividends. Generally, all blue-chip corporations are regarded as large caps, but not all large caps are regarded as blue chips. Market capitalization can be used as a comparative indicator of a company's stability and potential for growth. Large-cap companies typically have more opportunities for slow growth because they are more established and stable. Small caps are younger, potentially more volatile companies with room to expand. When looking for an investment that is more stable than small-cap companies while still having significant growth potential, investors may want to consider mid-caps because they offer a combination of these qualities. We looked at dozens of funds and considered various aspects to come up with this list of the top five mid-cap funds, which are not ranked in any particular order.

Expense ratio
Assets under management (AUM)
Historical returns
Liquidity

ETF Name AUM (as of July 26, 2021) Expense Ratio Inception Date Vanguard Mid-Cap ETF $151.1 billion 0.04% Jan. 26, 2004 Vanguard Extended Market ETF $114.5 billion 0.06% Dec. 27, 2001 iShares Russell Mid-Cap Growth ETF $15.9 billion 0.24% July 17, 2001 WisdomTree U.S. Mid-Cap Dividend Fund $3.0 billion 0.38% June 16, 2006 Nuveen ESG Mid-Cap Growth ETF $355.1 million 0.40% Dec. 13, 2016

Extended Market Vanguard ETF

3.-year return: 18.63% as of July 26, 2021
0.06 percent in expenses
As of July 26, 2021, there were $114.5 billion in assets under management (AUM).
Launched on December 27, 2001

A passively managed fund, the Vanguard Extended Market ETF seeks to replicate the performance of both small- and mid-cap companies by tracking the Spliced Extended Market Index. The S&P 500, for example, doesn't include all of the companies that focus on this index. Instead, it concentrates on companies that do. Vanguard is one of the biggest financial organisations in the world, managing more than $7.2 trillion in assets globally. As a result, investors won't have to be concerned about liquidity if they decide to buy or sell shares. The ETF, which is passively managed, has a low expense ratio of 0.06 percent, or $0.60 for every $1,000 invested, making it a great option for investors who want to make investments without incurring high fees. Those seeking solely mid-cap investments should look elsewhere because the fund has exposure to small- and mid-cap stocks.

Mid-Cap Vanguard ETF

As of July 26, 2021, the 3-year return was 16.49 percent.
The ratio of expenses: 0.04 percent
Assets under management (AUM): $154.1 billion as of July 26, 2021.
Date of creation: January 26, 2004

The Vanguard Mid-Cap ETF is a wise choice if you like the thought of investing in a low-cost, passively managed fund but only want to invest in mid-cap companies. It only focuses on medium-sized businesses, and it manages enough assets to keep costs down and liquidity up. Since the fund's inception in 2004, it has consistently outperformed its benchmark, lagging the Spliced Mid-Cap Index it is based on by just 0.04 percent or $0.40 for every $1,000 invested. In the previous three years, it had lagged the benchmark by a marginally smaller 0.02 percent margin.

Russell Mid-Cap Growth ETF from iShares

Return over three years as of July 26, 2021: 22.13%
The ratio of expenses: 0.24 percent
Assets under management (AUM): $15.9 billion as of July 26, 2021.
Date of creation: July 17, 2001

A fund that specializes in investing in mid-cap companies that are anticipated to grow faster than the rest of the market is the iShares Russell Mid-Cap Growth ETF. This indicates that the fund will probably avoid some of the more reliable mid-cap companies in favor of those putting significant expansion efforts forward. The fund has a 0.24 percent expense ratio, or $2.40 for every $1,000 invested, which is comparatively low. It does an excellent work of tracking the index, as evidenced by the fact that its three-year return of 22.13 percent trails its benchmark by less than the fund's expense ratio. Investors won't have to be concerned about liquidity when buying and selling shares due to the fund's management of more than $15 billion and the nearly 140 million outstanding shares.

Mid-Cap Growth ETF by Nuveen

As of July 26, 2021, the 3-year return was 24.18 percent.
The ratio of expenses: 0.40 percent
Assets under management (AUM): $355.1 million as of July 26, 2021.
Date of creation: December 13, 2016

A fund that focuses on mid-sized businesses that are positioned to grow faster than other businesses is the Nuveen ESG Mid-Cap Growth ETF. Additionally, environmental, social, and governance (ESG) investing is a focus of the fund. Both advantages and disadvantages may result from the fund's ESG focus. Others believe that ESG investing will likely outperform the whole market. Some people think that investing in ESG results in people missing out on significant companies that don't adhere to ESG standards. Over the past three years, the fund has fairly closely followed its index, returning 22.18 percent versus the index's 22.99 percent. Additionally, it has a reasonable 0.40 percent expense ratio or $4 for every $1,000 invested. Having said that, the fund only has $355.1 million in it, which is a small sum. This causes some investors to worry about liquidity in the event that they have to sell their shares.

U.S. mid-cap dividend fund from WisdomTree

Return over three years, as of July 26, 2021: 8.26%
The ratio of expenses: 0.38 percent
Assets under management (AUM): $3 billion as of July 26, 2021.
Date of beginning: June 16, 2006

An ETF that focuses on mid-sized businesses that also pay dividends is called the WisdomTree U.S. Mid-Cap Dividend Fund. While large-cap companies are frequently known for paying dividends, many medium-sized companies also do so. Investors who want exposure to that market segment, as well as income from their investments, will be drawn to this fund. A reasonable expense ratio for the fund is 0.38 percent or $3.80 for every $1,000 invested. Additionally, it manages about $3 billion in assets, so shareholders won't have to be concerned about liquidity when buying and selling shares.

The Benefits and Drawbacks of Mid-Cap ETF Investing

Pros

Offer a balance between stability and room for expansion.
Diversification can help mid-cap companies lower some of their risks.

Cons

Unlike large caps, less stable
Mid-cap firms might have less liquidity than large-cap firms.

Pros Presented

Offer a balance of stability and growth potential: Market capitalization is frequently used by investors to gauge stability and growth potential. Large caps are stable but have less room for growth. Despite being volatile, small caps can expand. Mid-caps offer investors a middle ground. Diversification can help mid-cap companies manage some risks: Mid-sized businesses frequently have a higher failure rate than larger ones and blue-chip corporations. ETFs make it simple to spread your investment across hundreds or thousands of businesses, minimizing the effect that one failing company will have on your portfolio.

Cons Described

Mid-cap companies are less stable than large-cap companies because they are less well-established and, as a result, less stable. Large caps frequently have lower price volatility and are thought to be more resilient to economic downturns. If they invest in mid-cap companies, some investors might not like the idea of having to wait through times of volatility in order to make a profit. Because fewer shares are available for trading, mid-cap companies may be less liquid than large caps. As a result, it might be more challenging for fund managers to purchase and sell shares as needed to manage the portfolio.

Trends in Past Performance

A variety of factors can impact a mid-cap ETF's performance. Mid caps are mid-sized businesses that typically want to expand into bigger enterprises. Many of them, though, is still in a fragile stage. This implies that a market downturn could cause them great harm. Important: Mid-cap stocks have underperformed large and small caps over the past ten years, but this hasn't always been the case. When choosing whether to invest in a mid-cap fund, investors must take the market's current state and future expectations into account.

Am I a Good Fit for Mid-Cap ETFs?

Mid-cap ETFs concentrate on making investments in medium-sized companies. These stocks might be a good choice for you if you're an investor looking to diversify your holdings. Mid-cap stocks typically have more room for growth than large-cap stocks, despite being perceived as slightly less stable. Focusing on mid-caps requires investors to have a long-term investing strategy because mid-caps may be more volatile.

The Bottom Line

A mid-cap ETF is a fund that invests in companies with a market capitalization of between $2 billion and $10 billion. For investors who don't want to put up with small caps' volatility but want more growth than large-cap funds, these companies provide a balance of stability and growth potential that may be valuable.

Most Commonly Asked Questions (FAQs)

Mid-cap ETFs – what are they?

Exchange-traded funds, known as mid-cap ETFs, are focused on investing in mid-cap companies. The market capitalization of a company that falls between $2 billion and $10 billion is considered to be mid-cap.

What are mid-cap ETFs, and how do I buy them?

Using a brokerage account is the most effective way to invest in a mid-cap ETF. Mid-cap ETFs are available from a lot of brokerages, including Vanguard, making it simple to get started. Amid the numerous mid-cap ETFs available, you might also consider purchasing shares using an investing app.

When should I purchase ETFs?

After considering your objectives and timeline for investing, you must decide for yourself when to purchase any investment. If you want to invest in mid-caps, you should often have a long-term investing goal rather than a short one because mid-cap ETFs are frequently more volatile than large-cap funds. In order to help you decide what investments to make, you might also think about speaking with a financial advisor. We don't offer advice or services related to taxes, investments, or finances. The information is being provided without taking into account any specific investor's investment goals, risk tolerance, or financial situation, so it might not be appropriate for all investors. Future outcomes cannot be predicted based on past performance. Risks associated with investing include the potential loss of principal.