What is Mid-Cap Fund?

635 reads · Last updated: December 5, 2024

A mid-cap fund is a pooled investment vehicle (e.g. a mutual fund or ETF) that explicitly invests in the stocks of mid-cap companies, or companies with market capitalizations ranging from approximately $2 billion to $10 billion.

Definition

A mid-cap fund is a focused investment tool, such as a mutual fund or exchange-traded fund, that specifically invests in stocks of mid-cap companies. These companies typically have a market capitalization between $2 billion and $10 billion. Mid-cap funds aim to achieve capital appreciation by investing in these moderately sized companies.

Origin

The concept of mid-cap funds originated in the late 20th century as investors sought diversified investment options between small-cap and large-cap stocks. Mid-cap companies are considered to have higher growth potential with relatively lower risk, attracting significant investor interest.

Categories and Features

Mid-cap funds can be categorized into actively managed and passively managed funds. Actively managed funds are directed by fund managers who make investment decisions based on market analysis and research, while passively managed funds typically track a specific mid-cap index. Features of mid-cap funds include higher growth potential, moderate risk, and good liquidity. They are suitable for investors looking to balance risk and return.

Case Studies

A typical example is the Fidelity Mid Cap Stock Fund, which focuses on investing in mid-cap company stocks and has historically performed well, providing stable returns. Another example is the Vanguard Mid-Cap ETF, which tracks the CRSP US Mid Cap Index, offering a low-cost option for investing in mid-cap stocks.

Common Issues

Common issues investors face when choosing mid-cap funds include evaluating the fund's management fees, historical performance, and the impact of market volatility on the fund. A common misconception is that mid-cap funds carry the same risk as small-cap funds, whereas mid-cap funds generally have lower risk than small-cap funds.

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Interest Expense

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Interest Rate Swap

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