If you’re interested in broad exposure to the Mid Cap Growth segment of the US equity market, look no further than the SPDR S&P 400 Mid Cap Growth ETF (MDYG), a passively managed exchange traded fund launched on 11/08/2005.
The fund is sponsored by State Street Global Advisors. It has amassed assets over $1.70 billion, making it one of the larger ETFs attempting to match the Mid Cap Growth segment of the US equity market.
Why Mid Cap Growth
With market capitalization between $2 billion and $10 billion, mid cap companies usually contain higher growth prospects than large cap companies, and are considered less risky than their small cap counterparts. These types of companies, then, have a good balance of stability and growth potential.
Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Additionally, growth stocks have a greater level of risk associated with them. They are likely to outperform value stocks in strong bull markets but over the longer-term, value stocks have delivered better returns than growth stocks in almost all markets.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.
Annual operating expenses for this ETF are 0.15%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.72%.
Sector Exposure and Top Holdings
It is important to delve into an ETF’s holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Industrials sector–about 21.10% of the portfolio. Information Technology and Consumer Discretionary round out the top three.
Looking at individual holdings, Solaredge Technologies Inc. (SEDG) accounts for about 1.61% of total assets, followed by Factset Research Systems Inc. (FDS) and Cognex Corporation (CGNX).
The top 10 holdings account for about 12.78% of total assets under management.
Performance and Risk
MDYG seeks to match the performance of the S&P MidCap 400 Growth Index before fees and expenses. The S&P MidCap 400 Growth Index measures the performance of the mid-capitalization growth sector in the U.S. equity market.
The ETF has lost about -4.67% so far this year and is up roughly 7.26% in the last one year (as of 01/11/2022). In the past 52-week period, it has traded between $70.57 and $84.
The ETF has a beta of 1.09 and standard deviation of 25.54% for the trailing three-year period, making it a medium risk choice in the space. With about 233 holdings, it effectively diversifies company-specific risk.
SPDR S&P 400 Mid Cap Growth ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, MDYG is an outstanding option for investors seeking exposure to the Style Box – Mid Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.
The Vanguard MidCap Growth ETF (VOT) and the iShares Russell MidCap Growth ETF (IWP) track a similar index. While Vanguard MidCap Growth ETF has $11.60 billion in assets, iShares Russell MidCap Growth ETF has $15.07 billion. VOT has an expense ratio of 0.07% and IWP charges 0.23%.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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