When it comes to investing, there are countless strategies and styles aimed at trying to maximize profit amid an acceptable level of risk. Given the diversity of the markets, it is as common to find an investor who is looking to buy shares of individual companies that meet specific metrics as it is to find another who wants to reduce company-specific risk and buy into funds that track broad sectors or markets.

One segment of the market that is well poised to capture the attention of all types of investors is known as the mid-caps, which are those companies in the market that have a 澳洲幸运5官方开奖结果体彩网:market capitalization between $2🔴 billion and $10 billion. In this article, we'll look at several common investing strategies that are utilized by investors seeking to gain e💞xposure to mid-cap companies.

Mid-Cap Market Segment

The mid-cap segment is considered by many investors to be the "sweet spot" of the market. Mid-cap companies are medium-sized businesses and are found in the middle of the business cycle, which means they no longer carry the same amount of 澳洲幸运5官方开奖结果体彩网:survival risk they did when they were smaller. Though mid-cap companies aren't as well esta🍷blished as the household names that comprise the large-cap segment, most companies that tra📖de within this group are well-positioned for the future.

The mid-cap segment tends to be relatively underfollowed by both retail and institutional investors despite strong levels of relative performance. According to S&P Dow Jones Indices, the 澳洲幸运5官方开奖结果体彩网:S&P MidCap 400 has beaten the 澳洲幸运5官方开奖结果体彩网:S&P 500 and the 澳洲幸运5官方开奖结果体彩网:S&P SmallCap 600 by an annualized rate of 2.03% and 0.92%, respectively, between December 1994 and May 2019. This type of strong relative performance could suggest that 澳洲幸运5官方开奖结果体彩网:passive investors may be interested in gaining broad exposure to the entiꦿre m🐼id-cap segment.

Mid-Cap ETFs

Many investors use a passive 澳洲幸运5官方开奖结果体彩网:buy-and-hold strategy to gain broad exposure to the mid-cap segment. This type of strategy is best carried out using 澳洲幸运5官方开奖结果体彩网:exchange-traded funds (ETFs) such as a blended mid-cap ETF that carries low fees and is designed to track a well-known mid-cap 澳洲幸运5官方开奖结果体彩网:benchmark such as the S&P 400, CRSP U.S. Mid Cap Index, or 澳洲幸运5官方开奖结果体彩网:Russell MidCap Index.

With most ETFs that target a certain market segment, there are slight differences between the funds based on the composition of the underlying constituents, which is something worth considering before you invest. Some common mid-cap focused ETFs based on total net assets are the iShares Core S&P Mid-Cap ETF (IJH), Vanguard Mid-Cap ETF (VO), iShares Russell Mid-Cap ETF (IWR), and SPDR S&P MIDCAP 400 ETF Trust (MDY).

Mid-Cap Value Stocks and ETFs

Value investors are on the lookout for companies that have share prices that are trading for less than their intrinsic value. Put more simply, this means that value investors try to identify companies that have share prices that are cheap or on sale relative to what the investor believes the true value ought to be. To determine when a stock is on sale, value investors often turn to financial metrics such as 澳洲幸运5官方开奖结果体彩网:price-to-book, 澳洲幸运5官方开奖结果体彩网:price-to-earnings, 澳洲幸运5官方开奖结果体彩网:free cash flow, and a variety of others. In essence, value investors utilize all public information and any research-driven insight to determine wꩵhat they view as a fair price. If the market price is less than the investor's researched price, then the stock becomes a candidate for investment.

Of course, investors can build a portfolio of value stocks based on their research, but many retail investors lack the time, skill, or interest required to conduct the necessary research that is essential to long-term success. Investors who want to apply a value-investing approach to the mid-cap segment will be interested to know that there is a wide variety of ETFs to choose from. Some examples include the Vanguard Mid-Cap Value ETF (VOE), iShares Russell Mid-Cap Value ETF (IWS), iShares S&P Mid-Cap 400 Value ETF (IJJ), and SPDR S&P 400 Mid-Cap Value ETF (MDYV).

Mid-Cap Growth Stocks and ETFs

Another type of investment strategy that is commonly applied to the mid-cap segment is focused on investing in companies that are expected to increase their earnings at an above-average rate compared to the rest of the sector or market. Strong and consistent earnings growth suggests that a mid-cap company could be on its way to becoming a large-cap and that the investor could be into their position early enough to make a substantial profit. 澳洲幸运5官方开奖结果体彩网:Growth investors anticipate that share prices of the companies they've identified could soon d🎃emand a higher premium based on increasing earnings when recognized by the broader market.

Investors who are interested in exposure to mid-cap growth companies may want to consider one of the growth-oriented mid-cap ETFs. Some examples to consider include the Vanguard Mid-Cap Growth ETF (VOT), SPDR S&P 400 Growth ETF (MDYG), and iShares Morningstar Mid-Cap Growth ETF (IMCG).

Targeted or Custom Investing Strategies

As mentionꦐed earlier, there are countless strategies when it comes to investing in mid-caps. The root of why there can be so many different strategies comes from the fact that potential investment candidates can be ident🧜ified by filtering based on myriad qualitative or quantitative factors.

Qualitative factors are those that are difficult to ident🍸ify numerically or by using traditional screening techniques because the factors of interest are intangible by nature. Some examples of qualitative factors include the type of corporate culture, manag🗹ement experience, and product quality.

Quantitative factors are those that have associated data points, which can then be compared about the same data points from other companies within the sector or the broader market. Quantitative factors include the data points and derived ratios or indicators that come from sources such as corporate financial statements, historical stock prices, or industry reports. Some examples of quantitative factors include 澳洲幸运5官方开奖结果体彩网:earnings per share (EPS), spending on 澳洲幸运5官方开奖结果体彩网:research and development (R&D), 澳洲幸运5官方开奖结果体彩网:debt-to-equity (D/E) ratio, and 澳洲幸运5官方开奖结果体彩网:net profit margin.

Investors can mix any number of qualit🦹ative and quantitative factors when it comes to building out their custom strategies.

The Bottom Line

Investors who are interested in gaining exposure to mid-cap companies can uꦺtilize a host of different types of strategies. Investors who want to take a passive approach and capture returns that closely match an underlying benchmark such as the S&P 400 may be interested in adding a position in a blended mid-cap ꧋ETF.

O🅺ther investors may be interested in identifying candidates that exhibit certain value or growth characteristics. More specifically, those that are drawn to more common value and growth strategies may be interested in one of the many available strategy-sp🧸ecific funds that target the mid-cap segment.

Lastly, more adventurous inve🔯stors may want to consider ꦜbuilding out their strategies by identifying qualitative or quantitative factors that resonate and then combining them in a way that meets their investment goals.

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