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Should SPDR S&P MidCap 400 ETF (MDY) Be on Your Investing Radar?

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Launched on 05/04/1995, the SPDR S&P MidCap 400 ETF (MDY - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Mid Cap Blend segment of the US equity market.

The fund is sponsored by State Street Global Advisors. It has amassed assets over $17.14 billion, making it one of the larger 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, companies that fall under this category provide a stable and growth-heavy investment.

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

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.22%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.28%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 18.40% of the portfolio. Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Camden Property Trust (CPT - Free Report) accounts for about 0.74% of total assets, followed by Targa Resources Corp. (TRGP - Free Report) and Alcoa Corporation (AA - Free Report) .

The top 10 holdings account for about 6.1% of total assets under management.

Performance and Risk

MDY seeks to match the performance of the S&P MidCap 400 Index before fees and expenses. The S&P MidCap 400 Index is composed of 400 selected stocks listed on national stock exchanges, and spans a broad range of major industry groups.

The ETF has lost about -18.83% so far this year and is down about -14.08% in the last one year (as of 07/05/2022). In the past 52-week period, it has traded between $402.57 and $531.03.

The ETF has a beta of 1.12 and standard deviation of 28.79% for the trailing three-year period, making it a medium risk choice in the space. With about 401 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR S&P MidCap 400 ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, MDY is a reasonable option for those seeking exposure to the Style Box - Mid Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The Vanguard MidCap ETF (VO - Free Report) and the iShares Core S&P MidCap ETF (IJH - Free Report) track a similar index. While Vanguard MidCap ETF has $46.92 billion in assets, iShares Core S&P MidCap ETF has $56.45 billion. VO has an expense ratio of 0.04% 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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