U.S. stocks are once again flirting with record highs, and while large caps remain investors' preferred destination, well-documented has been the out-performance offered by mid caps this year. There are scores of exchange-traded funds offering investors to this cap spectrum, plenty of which are also cost effective.
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S&P Capital IQ's Focus ETF
One of the cheapest is the Schwab Stragetic Trust(SCHM). In fact, SCHM charges just 0.07 percent per year, or $7 on a $10,000 investment. However, there are other reasons why SCHM was named S&P Capital IQ's focus ETF for the month of September.
As has been recently noted, active managers in the mid-cap arena have a hard time beating their benchmarks, which increases the allure of low-cost, passive mid-cap funds like SCHM.
According to Investment Company Institute data, mid-cap mutual funds had $29 billion of outflows year to date through August 17, more than the $23 billion in outflows experienced by large-cap funds. Though we find this surprising given the popularity of passive S&P 500 index based investments, recent data from S&P Dow Jones Indices indicates that active mid cap funds face greater challenges, notes S&P Capital IQ. 28 percent of the funds that were in the top quartile in the 12-month period ended March 2014 finished in the bottom quartile within the next two periods.
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Pretty, But Not Perfect
However, SCHM is not perfect. Year-to-date, the ETF is up 10.2 percent, well behind the 13.4 percent returned by the S&P MidCap 400 Index. SCHM tracks the Dow Jones U.S. Mid-Cap Total Stock Market Index.
The $2.5 billion SCHM allocates 27 percent of its weight to financial services stocks and a combined 29 percent to consumer discretionary and industrial names.
Further helping its S&P Global Market Intelligence's ranking is our view that SCHM trades with bullish technical tendencies and is now higher than its 200-day moving average, added S&P Capital IQ.
The research firm has an Overweight rating on SCHM.
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