It’s no secret that most Australian investors are concentrated in blue-chip
shares. By holding too many large eggs in too few baskets investors maybe missing
out on the growth opportunities offered by Australian mid-caps.
Historically, mid-caps have
produced stronger returns than large-caps, with only slightly more volatility;
Mid-caps have also produced
risk-adjusted outperformance relative to small-caps
simply, the sweet spot of the Australian stock market. There are several
reasons for this:
Mid-caps are where M&A
happens. Vocus Communications is the latest takeover target but there have been
several over recent years, including Toll Holdings, Dexus, Asciano
Mid-caps tend to reinvest more
in their business than large-caps;
Mid-cap companies are often
more agile then large-caps, able to take advantage of opportunities more
quickly by virtue of their smaller size; and
According to S&P,
constituents of the S&P/ASX MidCap 50 have experienced meaningfully higher revenue
growth and higher net income growth, as the graphs below indicate (source Mid-Cap Indexing in Australia, S&P
Dow Jones Indices, 2016)
Reflecting these advantages, the graph below illustrates that over the long term, as well as in recent times, the S&P/ASX Midcap 50 Index has easily outperformed the benchmark large-cap and small-cap indices. Indeed, in recent times, mid-caps have sprinted ahead of large-cap shares.
The VanEck Vectors S&P/ASX MidCap ETF (ASX: MVE) is the only ASX ETF which tracks the S&P/ASX MidCap 50 Index.
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