Good news for fans of the Kiplinger ETF 20: Following the latest salvos in the brokerage price wars, customers at practically every major online broker can now purchase all 20 of the exchange-traded funds on our list commission-free. Still, investors are unlikely to look back fondly on free trades if the funds they buy post lackluster results.
Take iShares Core S&P Mid-Cap (symbol, IJH), which after an up-and-down 12 months for stocks is among the worst performers on our list. Its –2.6% return lags the large-company Standard & Poor's 500-stock index by 6.9 percentage points over that period. In one sense, that's to be expected. Stocks with midsize market capitalizations (share price times shares outstanding), typically between $2 billion to $10 billion, tend to fare worse than larger names during market downturns, says BlackRock ETF strategist Elizabeth Grenfell. "Large caps by their nature tend to hold up better during periods of volatility, thanks to their size and the stability of their cash flows," she says.
Baked into the one-year results is a particularly nasty downturn from mid September through late December 2018, when the S&P Mid-Cap 400 index, the benchmark that iShares Core S&P Mid-Cap tracks, fell into bear-market territory with a loss of 21%. Mid caps have been slower than their large-company counterparts to recover, and they still haven't made it all the way out of the hole.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But the lag in mid caps presents investors with the chance to buy good stocks relatively cheaply, says Brian Andrew, chief investment officer for wealth management firm Johnson Financial Group. He says mid caps are in a market sweet spot, capturing the fast growth potential of ascending small firms combined with the financial maturity of larger companies. The potential for mid caps to excel has been borne out historically: From 1994 through May 2019, the annualized return of the S&P Mid-Cap 400 has bested comparable small-cap indexes by 0.9 percentage point and large-cap indexes by 2.0 points. Stocks in the mid-cap index currently trade at 16.7 times projected earnings over the next 12 months, compared with a multiple of 17.2 for the S&P 500.
The best way to invest. Andrew recommends that investors use the breakdown of the broad market's capitalization as a guide for their domestic stock allocation, with roughly 70% of assets in large caps, 20% in mid caps and 10% in small caps. The iShares ETF is among the most inexpensive and highly diversified mid-cap funds, charging just 0.07% of assets for exposure to some 400 stocks.
-
The Stoic Retirement: Ancient Wisdom for Today's RealityA "Stoic retirement" doesn't mean depriving yourself. It's a character-based approach to life and aging that can bring calm and clarity.
-
My Teen Crashed His Car and Now Our Insurance Has Tripled. What Now?Dealing with the costly aftermath of a teen car accident is stressful. Here are your options for navigating it.
-
11 Outrageous Ways To Spend Money in RetirementWhether you have excess cash to spend or want to pretend, here’s a look at 11 ridiculous ways retirees can splurge.
-
The 5 Best Actively Managed Fidelity Funds to Buy and Holdmutual funds Sometimes it's best to leave the driving to the pros – and these actively managed Fidelity funds do just that, at low costs to boot.
-
The 12 Best Bear Market ETFs to Buy NowETFs Investors who are fearful about the more uncertainty in the new year can find plenty of protection among these bear market ETFs.
-
Don't Give Up on the Eurozonemutual funds As Europe’s economy (and stock markets) wobble, Janus Henderson European Focus Fund (HFETX) keeps its footing with a focus on large Europe-based multinationals.
-
Vanguard Global ESG Select Stock Profits from ESG Leadersmutual funds Vanguard Global ESG Select Stock (VEIGX) favors firms with high standards for their businesses.
-
Kip ETF 20: What's In, What's Out and WhyKip ETF 20 The broad market has taken a major hit so far in 2022, sparking some tactical changes to Kiplinger's lineup of the best low-cost ETFs.
-
ETFs Are Now Mainstream. Here's Why They're So Appealing.Investing for Income ETFs offer investors broad diversification to their portfolios and at low costs to boot.
-
Do You Have Gun Stocks in Your Funds?ESG Investors looking to make changes amid gun violence can easily divest from gun stocks ... though it's trickier if they own them through funds.
-
How to Choose a Mutual Fundmutual funds Investors wanting to build a portfolio will have no shortage of mutual funds at their disposal. And that's one of the biggest problems in choosing just one or two.
