This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Mid-Cap ETFs Gain Favor

NEW YORK ( TheStreet) -- With major stock market indices pushing higher, the luster of large-cap equities may be wearing off for some.

While these market giants proved to be a welcomed safe haven as global macroeconomic headwinds have plagued investor sentiment during the waning months of 2011, those who have opted to stick to this "big and boring" investing strategy in 2012 have sacrificed some potential gains.

On a year-to-date basis, the iShares Russell 2000 Index Fund (IWM) has managed to handedly beat out the SPDR Dow Jones Industrial Average Index Fund (DIA), returning over 12.5% year to date compared to less than 9% for DIA .

As a result, investors may be tempted to shed their exposure to blue chips and wield their microscopes in search of small, fast-moving companies. However, this strategy is not ideal given the current market environment.

Thanks to their upside potential and inherent volatility, firms in the bottom of the size spectrum are typically turned to during periods of market euphoria. The pendulum swings both ways though: Just as they can surge to leadership roles as markets march higher, they can suffer equally swift declines in the event that sentiment turns south.

Evidence of this bipolarity can be seen when looking at IWM's performance since the start of the month. Although the market rally has continued over the past few weeks, the ride higher has not been smooth.

What Buffett Knows About Bank Investing That You Don't

On the contrary, just last week we were given a harsh reminder of the challenges facing nations like Greece and China. In response to this news, ETFs linked to the Russell 2000 and other major U.S. stock indices took hits. IWM was the clear loser during this downturn, retreating to levels last seen in late-January. The small-cap focused fund has since recovered along with the rest of the market, though it is only now returning to pre-downturn territory.

Although headwinds have subsided, in the event that turbulence returns, investors can expect a repeat of the past weeks' action from IWM. Smaller may appear better, but in order to avoid being taken for a ride, risk hungry investors should consider setting their sights on slightly larger targets.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DIA $176.44 0.07%
IJH $144.43 -0.08%
IWM $110.26 -0.40%
AAPL $93.24 -0.41%
FB $117.81 -0.21%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs