What is a 'Mid-Cap Fund'

A mid-cap fund is a type of investment fund that focuses its investments on companies with a capitalization in the middle range of stocks in the investable market. Companies with market capitalizations ranging from $2 billion to $10 billion are typically considered mid-cap companies.

BREAKING DOWN 'Mid-Cap Fund'

Mid-cap funds provide a diversified portfolio of mid-cap companies for investors. Mid-cap stock investments are generally firms with established businesses. The general capitalization range for mid-cap companies is $2 billion to $10 billion. Therefore, these companies have made equity capital market issuance a substantial part of their firm’s capital structure and have also demonstrated significant access to the capital markets for equity share issuance. Overall, mid-cap companies tend to offer more growth potential than large-cap stocks with less volatility than the small-cap segment. Mid-cap funds seek to capitalize on this capital appreciation potential by creating funds that are diversified among mid-cap companies.

Many fund companies and indexes focus on mid-cap stocks with an additional component such as growth or value utilized to enhance the fund’s objective. Mid-cap funds can be actively managed or passively managed. The mid-cap segment of the market offers a wide range of investment options for investors. Some of the mid-cap segment’s most popular benchmarks are the S&P Mid-Cap 400 Index, the Russell Mid-Cap Index and the Wilshire U.S. Mid-Cap Index.

Mid-Cap Fund Investments

Below are examples of some of the market’s top mid-cap funds.

BlackRock Mid-Cap Growth Equity Fund (BMGAX)

The BlackRock Mid-Cap Growth Equity Fund is an actively managed mutual fund. It seeks to invest in mid-cap companies from the Russell Midcap Growth Index that it believes have superior growth characteristics. As of December 1, 2017, it had a year to date return of 34.59%. The Fund is benchmarked to the Russell Mid-Cap Growth Index which had a return of 23.70%. The Fund has a gross expense ratio of 1.45% and a net expense ratio of 1.39%.

Vanguard Mid-Cap Index Fund Investor Shares (VIMSX)

The Vanguard Mid-Cap Index Fund is one of the largest passive index funds in the mid-cap market segment. The Fund uses an index replication strategy to track the holdings and performance of the CRSP U.S. Mid-Cap Index. As of November 30, 2017, the Fund had a year to date return of 18.01% versus its benchmark which reported a return of 18.18%. The Fund has an expense ratio of 0.18%.

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