Mid Cap Stock Investing

We suggest that you think of mid cap stock investing as the Goldilocks approach to investing. In Goldilocks and the Three Bears the little girl samples the porridge of the three bears and finds that one is too hot and one is too cold and one is just right. To a degree large cap stocks may be too large and done with rapid growth. Small cap stocks may be too risky. And mid cap stock investing may be just right. Before looking more closely at mid cap stock investing, what is market capitalization and how is this categorization useful to investors? Market capitalization (market cap) is the total value of shares of a publicly traded company. Multiply share value times number of shares and you get the market cap of the company. A mid cap company has a market capitalization of between two and ten billion by most definitions.

Growth, Risk, and Market Cap

As a rule small cap stocks, 300 million to two billion in market capitalization, are more likely to grow substantially than mid or large cap stocks. They are also more likely to fail. Large cap stocks have capitalization in excess of ten billion and are more stable and not likely to fail but they are as a rule not going to grow in multiples like a small cap stock. Mid cap stock investing is attractive in that mid cap stocks have a higher growth potential than large caps and a lower risk of failure than small caps. Fundamental analysis in mid cap stock investing is typically more accurate than analysis of small caps as these stock commonly have a longer track record to analyze. When you are doing investment research in mid cap stock investing you will have a sense of how well products of the company sell and how profitable it is. On the other hand a small cap new stock may have promising products but no record of sales. The issue with large cap stocks is that although they may still grow they will likely not double every year like a mid cap stock or small cap stock might.

Mid Cap Stock Investing via Exchange Traded Funds

The Russell Mid Cap stock index tracks mid cap stocks. Here is a brief list of ETFs that track the Russell Mid Cap stock index.

IJH                  iShares Core S&P Mid-Cap ETF
MDY               SPDR MidCap Trust; Series 1
IWR                iShares Russell Midcap Index Fund
VO                  Vanguard Mid-Cap ETF
VXF                Vanguard Extended Market ETF
SCHM            Schwab U.S. Mid-Cap ETF
FNX                First Trust Mid Cap Core AlphaDEX Fund
IVOO              Vanguard S&P Mid-Cap 400 ETF
JKG                iShares Morningstar Mid Core Index Fund
RWK               RevenueShares Mid Cap Fund
CZA                Guggenheim Mid-Cap Core ETF
EWRM           Guggenheim Russell 2000 Equal Weight ETF
TRNM             RBS US Mid Cap Trendpilot ETN
PXMC             PowerShares Fundamental Pure Mid Core Portfolio
XMLV             PowerShare S&P MidCap Low Volatility

The advantage of mid cap stock investing via an ETF is that investing in the index helps average out the risk of mid cap versus large cap investing.

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