This white paper, originally released in October 2018, has been updated with data as of September 30, 2020.
The mid-cap segment of the equity market is often overlooked, falling between headline-grabbing and widely followed large caps and small caps known for their high growth potential. Mid-caps—generally defined as companies between $2 billion and $10 billion in market capitalization, with some reaching north of $30 billion— have historically outperformed both small- and large-cap stocks, but don’t get much investor attention.
The lines between market-cap categories can be blurry, leading many investors to believe that owning both large and small stocks provides sufficient exposure across the market-cap spectrum. In fact, data point to a clear underrepresentation of the asset class. Mid-caps make up about 23% of the overall equity market, according to a breakdown of the Russell indexes, but actual investments into the asset class only account for over 12% of all invested assets, as represented by Morningstar asset flows.
Investors lacking a dedicated allocation to mid-caps may be missing exposure to a crucial segment. Mid-cap stocks have proven to be a positive addition to a diversified portfolio of equities, both in terms of boosting portfolio return and lowering risk.
Mid-Cap Allocation Tool
Use this interactive tool to see how an allocation to mid-cap stocks may improve an equity portfolio’s performance and mitigate risk over time.