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Should Vanguard MidCap ETF (VO) Be on Your Investing Radar?

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Looking for broad exposure to the Mid Cap Blend segment of the US equity market? You should consider the Vanguard MidCap ETF (VO), a passively managed exchange traded fund launched on 01/26/2004.

The fund is sponsored by Vanguard. It has amassed assets over $52.19 billion, making it one of the largest ETFs attempting to match the Mid Cap Blend segment of the US equity market.

Why Mid Cap Blend

Mid cap companies, with market capitalization in the range of $2 billion and $10 billion, offer investors many things that small and large companies don’t, including less risk and higher growth opportunities. These types of companies, then, have a good balance of stability and growth potential.

Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.

Costs

When considering an ETF’s total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.04%, making it the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.31%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Looking at individual holdings, Pioneer Natural Resources Co. (PXD) accounts for about 0.70% of total assets, followed by Amphenol Corp. And Palo Alto Networks Inc. (PANW).

The top 10 holdings account for about 2.77% of total assets under management.

Performance and Risk

VO seeks to match the performance of the CRSP US Mid Cap Index before fees and expenses. The CRSP US Mid Cap Index targets inclusion of the U.S. companies that fall between the top 70%-85% of investable market capitalization.

The ETF has lost about -10.06% so far this year and is down about -0.22% in the last one year (as of 05/05/2022). In the past 52-week period, it has traded between $218.76 and $261.20.

The ETF has a beta of 1.08 and standard deviation of 24.89% for the trailing three-year period, making it a medium risk choice in the space. With about 371 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard MidCap 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, VO is an excellent option for investors seeking exposure to the Style Box – Mid Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares Russell MidCap ETF (IWR) and the iShares Core S&P MidCap ETF (IJH) track a similar index. While iShares Russell MidCap ETF has $29.36 billion in assets, iShares Core S&P MidCap ETF has $63.95 billion. IWR has an expense ratio of 0.19% and IJH charges 0.05%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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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Vanguard MidCap ETF (VO): ETF Research Reports
 
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
 
Palo Alto Networks, Inc. (PANW) : Free Stock Analysis Report
 
iShares Core S&P MidCap ETF (IJH): ETF Research Reports
 
iShares Russell MidCap ETF (IWR): ETF Research Reports
 
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