Linda Abu Mushrefova: Equities have been on a continuous upward trajectory since the conclusion of the financial crisis, and one area that has done particularly well has been mid-cap growth. Investing in funds that play lower down the market-cap spectrum can offer attractive diversification and risk-return characteristics.
Investors may be wary of mid-cap funds due to the potential of higher risk and lower liquidity of names. However, in the context of a well-diversified portfolio, these types of funds can actually lower the risk profile by offering less correlated returns. Further, many mid-cap managers make the argument that it is easier to produce outperformance in this area of the market due to higher inefficiencies.
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Linda Abu Mushrefova does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.