Best Midsize Stock Funds
Winner: Scout Mid Cap
Midcap stocks — that is, those with a market capitalization of roughly $1 billion to $8 billion — are attractive to many investors. These are stocks of decent size, from companies that still have significant growth potential ahead.
The trouble, of course, is picking the right stocks in this group amid high volatility, where big losers can offset any big winners in a midcap fund portfolio.
With almost $800 million under management, the Scout Mid Cap Fund (MUTF:UMBMX) is a proven winner when it comes to picking stocks. This fund gets Morningstar’s top five-star rating, and it has a one-year return of over 13%, more than double the market. Its five-year return averages more than 9%, which would have turned $10,000 into $15,000 since 2007 — while the broader market is basically flat.
With market volatility likely to remain high amid sovereign debt woes, high unemployment and the run-up to the 2012 elections, it could be more of the same for midcaps in 2012. That means good managers with a solid track record are key. With a 1.04% expense ratio, the Scout fund is worth the price of admission if it can keep this record of success.
Runner Up: Vanguard Mid-Cap Growth
If you don’t want to trust a manager, keep in mind that many actively managed midcap funds have underperformed the benchmark MSCI US Mid Cap 450 Index in recent years. So why not just buy the index itself via the Vanguard Mid-Cap Growth Index Fund (MUTF:VMGIX)? A rock-bottom expense ratio of 0.26% (plus a $75 transaction fee) gives you a cost-effective way to play midsize stocks.