If investors are wary of large cap valuations and don’t want to assume the risk of small caps, then midcap equities can offer a “Goldilocks” solution. To that point, Invesco has a pair of exchange traded funds (ETFs) to consider for midcap exposure.
Getting midcap exposure offers investors the perfect balance between getting the stability of large caps while also adding a growth component that small caps can provide.
“Many investors prefer the relative stability and name recognition offered by large stocks,” confirmed Jeff Reeves in Forbes Advisor. “On the other hand, some prefer the dynamic potential of the smallest companies on Wall Street, even if those firms sometimes carry elevated risk. But in between are “Goldilocks”—mid-cap stocks. Those companies are neither too small to be at risk of folding due to one misstep, nor so large that their biggest, fastest growth is well behind them.”
ETFs in particular can offer investors an ideal solution given the vast universe of midcap stocks to choose. Additionally, funds can offer further exposure that skews towards factor-based strategies to allow for a more tailored investing approach.
“Mid-cap ETFs are one-stop shops for this class of stocks,” Reeves added. “They provide broad exposure to this middle tier in a single and diversified fund. However, there’s a wide variety of such ETFs. Many target different slices of the mid-cap stock universe.”
That said, one fund to consider that offers a blend of factors is the Invesco S&P Midcap 400 GARP ETF (GRPM). The fund is based on the S&P MidCap 400® GARP Index and offers a blend of factors for a more discerning screener. It tracks companies that exhibit consistent fundamental growth, reasonable valuation, solid financial strength, and strong earning power.
Another Quality Midcap Option
If investors want to key in on a specific factor, say quality for example, they should consider using the Invesco S&P MidCap Quality ETF (XMHQ). Rather than casting a stone into the deep pool of midcap names within the S&P index, it incorporates holdings that focus more on quality.
Per its baseline fund description, XMHQ seeks to track the investment results of the S&P MidCap 400® Quality Index. The Index is a modified market capitalization weighted index that holds approximately 80 securities in the S&P Midcap 400® Index that have the highest quality scores, which are computed based on a composite of three proprietary factors.
For more news and information, visit the Innovative ETFs Channel.
