If you’ve been involved in the stock market for a while, you’ve probably heard about the advantages of index fund investing. They are relatively simple to own and frequently yield better returns than selecting individual stocks. Often, the Vanguard S&P 500 ETF or the SPDR S&P 500 ETF Trust is recommended as the go-to option since they track the S&P 500.
Nonetheless, that’s not your only choice. In fact, you might find that it isn’t even the best choice for you. Consider introducing the Vanguard Midcap ETF (NYSEMKT:VO) to your portfolio. Here’s why:
The Vanguard Mid-Cap ETF primarily invests in mid-cap stocks, which are defined as those with a market capitalization ranging from $2 billion to $10 billion. This fund aims to mimic the performance of the 290 stocks within its cap-weighted index, the CRSP US Mid Cap. Similar returns can be seen in the S&P 400 Midcap index and its corresponding ETF.
For long-term investors, holding onto this ETF is crucial. It has historically outperformed the S&P 500. Yes, the S&P 500 has been remarkably strong since 2020, largely due to the hefty gains of major tech stocks driven by the rise of artificial intelligence.
However, dating back to when it was established in 1991, the S&P 400 Mid-Cap index has consistently outshined its larger counterpart.
This makes sense when you think about it. Mid-sized companies often find themselves in a sweet spot; they might have moved beyond the risky start-up phase, yet they haven’t fully unlocked their potential for growth—this typically happens when they scale. Often, successful companies leverage the right product or service at just the right time.
Take, for example, UiPath, which was recently added to the S&P 400. Similarly, Robinhood and Carvana have both jumped from the S&P 400 to the S&P 500, all thanks to markets being receptive to new offerings.
That said, not every mid-cap stock in the CRSP US Mid-Cap Index or Vanguard Mid-Cap ETF is guaranteed to succeed. Like the S&P 500, some stocks merely keep up with others. Occasionally, companies fall behind and are removed from their respective indexes.
Nevertheless, many of these stocks perform sufficiently well to position the entire group favorably compared to others. This trend could persist for quite some time. If you hold a diverse array of these stocks, it’s definitely a more manageable way to enhance your portfolio’s performance, rather than the daunting task of tracking and monitoring these often-overlooked stocks individually.
If you’re considering investing in the Vanguard Midcap ETF, here are a few things to keep in mind:
According to Motley Fool Stock Advisor, their analysts have identified a list of what they think are the Best 10 stocks to consider right now, surprisingly, Vanguard Midcap ETF is not on that list. These top picks are projected to deliver impressive returns over the next several years.
For context, if you had invested $1,000 in Netflix when it was recommended back in December 2004, you’d have about $509,470 today. And if you’d invested the same amount in Nvidia recommended back in April 2005, you’d be looking at roughly $1,167,988.
It’s worth noting that stock advisor has an average return of 991%, which far outpaces the S&P 500’s 196%. So, if you’re interested, don’t miss out on their latest list of Top 10 stocks. They’ve built a community focused on retail investors, for retail investors.
*Stock Advisor returns as of December 29, 2025
James Brumley holds no positions in the stocks mentioned. The Motley Fool is involved in positions with and recommends UiPath and Vanguard Index Fund Vanguard Midcap ETF. The Motley Fool has a Disclosure policy.
Why I will leave this mid-cap ETF alone for decades Originally published by The Motley Fool
