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Diversify With One of These Mid-Cap Equity Funds

Diversify With One of These Mid-Cap Equity Funds
Securities In This Article
FMI Common Stock Investor
Diamond Hill Mid Cap Inv
MFS Mid Cap Growth A
Diamond Hill Small-Mid Cap Inv
Vanguard Mid Cap Index Investor

Linda Abu Mushrefova: Mid-cap equity exposure is a great way to diversify a portfolio. Managers looking for stocks in the mid-cap space can identify companies that have grown large enough to exit the small-cap arena, suggesting that they are more established and often less risky than their small-cap counterparts, but still have runway for growth and can evolve into a large-cap name. Currently, the Russell Mid Cap Index benchmark has an average market cap of roughly $14 billion versus the Russell 2000 Index's, a small-cap benchmark, $2 billion average, and the Russell 1000 Index's, a large-cap bogy, $95 billion.

For mid-cap blend exposure, we like Gold-rated FMI Common Stock. A stable 10-person management team adopts a collaborative, high-conviction approach that has rewarded investors through strong stock-picking since CIO and longest-tenured manager Patrick English joined the squad in October 1997.

In the mid-cap value category, Gold-rated Diamond Hill Mid Cap stands out. It boasts a deep, stable bench helmed by veteran manager Chris Welch. He collaborates with Diamond Hill’s analysts to apply its disciplined approach to value investing. The track record here is still short, but he’s proven the merits of the team’s bottom-up stock-picking prowess in similar charge Diamond Hill Small-Mid Cap, which is closed to new investors, since its December 2005 inception. We expect investors to reap the benefits of the team’s responsible approach in this iteration over the long haul as well.

Silver-rated MFS Mid Cap Growth is a fine choice for mid-cap growth exposure. It benefits from an experienced and well-resourced management team that has consistently applied its investment process, focused on uncovering mid-cap firms whose earnings and cash flow growth prospects are underappreciated by the market.

Finally, investors could opt for a passive option such as Gold-rated Vanguard Mid Cap Index to gain exposure to the mid-cap arena. Whether active or passive exposures, investors should consider adding a dedicated mid-cap equity fund as it can serve a valuable role in a diversified portfolio.

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About the Author

Linda Abu Mushrefova

Senior Product Manager, ETF's
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Linda Abu Mushrefova, CFA, is a manager research analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. She covers equity strategies.

Before rejoining Morningstar in 2017, Mushrefova was an analyst on the fixed-income team at Neuberger Berman, covering opportunistic strategies. From 2013-16, she held a variety of roles at Morningstar, including as a product consultant and a data analyst for the firm's open-end and hedge fund databases.

Mushrefova holds a bachelor's degree in economics from Northwestern University. She also holds the Chartered Financial Analyst® designation.

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