3 Top Mid-Cap Growth ETFs

new etfsLawrence Meyers: ETFs have proven to be a great tool for asset allocation. They permit investors to directly target sectors and investment styles that align with a diversified long-term portfolio strategy.


It’s difficult to say which ETFs are “best,” because everything depends on an investor’s risk tolerance and target returns. To that end, I’m not suggesting these are three best mid-cap growth ETFs, but ones that may be best suited to three categories of investors: the aggressive investor, the conservative investor and the average investor.

A good mid-cap growth ETF for the average investor is iShares S&P Mid-Cap 400 Growth ETF (NYSEArca: IJK). The fund is designed to give investors exposure to mid-sized U.S. companies whose earnings growth is expected to be above average compared to the overall market.

This ETF holds 221 stocks. It thus offers less diversification than its broad index counterparts, but that could result in longer-term outperformance. That has been true from what we’ve seen from it so far, as it has nearly doubled the cumulative return of the S&P 500 over the past 10 years.

The top 10 holdings only account for 12% of the assets, which is very low, and I like it that way. The sector breakdown is 22% financials, 20% tech, 17% consumer discretionary, 15% industrial, 12% health care, 5% materials and 2% energy. Top holdings include: Quorvo Inc (NASDAQ: QRVO), Signet Jewelers (NYSE: SIG), Church and Dwight Co. (NYSE: CHD) and Advance Auto Parts (NYSE: AAP).

For conservative investors, it is difficult not to recommend the Vanguard S&P Mid-Cap 400 Growth ETF (NYSEArca: IVOG).

With 223 holdings, it’s actually about as diversified as the iShares fund, and the top 10 holdings only account for 11.4% of its asset base. Once again, keeping the largest holdings at only 1% or so of the asset base gives you the less-volatile, equal-weight approach that I like. And you get the Vanguard low-cost expense ratio of 0.2%.

Some of the Vanguard fund’s top holdings include Federal Realty Investment Trust (NYSE: FRT),Wabtec Corp. (NYSE: WAB), Mettler-Toledo International (NYSE: MTD) and UDR Inc. (NYSE: UDR).

The fund also has strong sector diversity. It has 23% invested in financials, 21% in consumer staples and discretionary, 19% in tech, 15% in industrials, 12% in health care and 1% in energy.

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