Mid Cap Stocks

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Mid cap stocks are issued by companies with a market capitalization between $2 billion and $10 billion. Market capitalization is the product of a company’s current share price and the total number of its outstanding shares. The benchmark used to classify stocks as small cap, mid cap or large cap changes with time.

How to Find Mid Cap Stocks?

One can identify mid cap stocks by referring to the following mid cap indices:

  • Dow Jones Wilshire U.S. Index: On this index, stocks ranked within the range of 501 to 1,000 are called mid cap stocks.
  • S&P MidCap 400 Index: It comprises of 400 domestic mid cap stocks. This is a market-value weighted index and represents one of the first yardsticks for monitoring the price movements of mid cap stocks.
  • Russell MidCap Index: It is a subset of Russell 1000 and Russell 3000. It represents 800 companies with a market capitalization between $8 billion and $10 billion. The median value ranges from $4 billion to $5 billion. The index is upgraded annually.
  • Investors can also check prominent financial publications, such as Forbes, to know more about mid cap stocks.

    Mid Cap Stocks: Pros and Cons

    Advantages of mid cap stocks:

    • Mid caps are less affected than small caps by the broader market sentiment and daily variations in the trading volume.
    • They represent lower operational risk than small caps.
    • Unlike the saturated large cap stocks, mid cap shares have potential to grow.
    • Typically mid caps yield higher returns than large caps in the long term.

    Although mid cap shares can be lucrative investment options, they are riskier than their large cap counterparts. Also, they are more expensive and less liquid than large cap stocks.

    During the financial crisis of 2008, mid cap stocks performed better than the blue chips, which were previously very popular among investors. However, amateur investors could consider beginning with mutual funds that specialize in mid cap stock investing. This will save you the bother of researching individual companies. Investing in mid cap mutual funds will minimize the risk element, while maximizing the profit potential.

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