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

Style Box ETF report for VO

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This story originally appeared on Zacks

The Vanguard MidCap ETF (VO) was launched on 01/26/2004, and is a passively managed exchange traded fund designed to offer broad exposure to the Mid Cap Blend segment of the US equity market.

- Zacks

The fund is sponsored by Vanguard. It has amassed assets over $53.86 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

Compared to large and small cap companies, mid cap businesses tend to have higher growth prospects and are less volatile, respectively, with market capitalization between $2 billion and $10 billion. Thus they have a nice balance of growth potential and stability.

Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

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

It has a 12-month trailing dividend yield of 1.16%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 21.90% of the portfolio. Industrials and Healthcare round out the top three.

Looking at individual holdings, Dexcom Inc. (DXCM) accounts for about 0.77% of total assets, followed by Marvell Technology Inc. (MRVL) and Msci Inc. (MSCI).

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 of investable market capitalization. The index includes securities traded on NYSE, NYSE Market, NASDAQ or ARCA.

The ETF has added about 23.18% so far this year and it's up approximately 38.45% in the last one year (as of 10/28/2021). In the past 52-week period, it has traded between $176.14 and $253.35.

The ETF has a beta of 1.09 and standard deviation of 24.26% for the trailing three-year period, making it a medium risk choice in the space. With about 381 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 outstanding 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 $30.48 billion in assets, iShares Core S&P MidCap ETF has $64.98 billion. IWR has an expense ratio of 0.19% and IJH charges 0.05%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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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Vanguard MidCap ETF (VO): ETF Research Reports

 

DexCom, Inc. (DXCM): Free Stock Analysis Report

 

Marvell Technology, Inc. (MRVL): Free Stock Analysis Report

 

MSCI Inc (MSCI): 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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Zacks Investment Research