Vanguard Mid-Cap Index is a mutual fund that tracks the performance of the CRSP US Mid Cap Index, which is comprised of medium-sized U.S. companies. The fund invests in a diverse portfolio of mid-cap stocks, seeking to replicate the index’s performance.
Here are some key points to help you understand the Vanguard Mid-Cap Index:
- Definition of Mid-Cap
Mid-cap companies are those with market capitalizations between $2 billion and $10 billion. These companies are generally considered to be less risky than small-cap companies but still have the potential for significant growth.
- Objectives of Vanguard Mid-Cap Index
The main objective of Vanguard Mid-Cap Index is to provide long-term capital appreciation by investing in a diversified portfolio of mid-cap stocks that track the CRSP US Mid Cap Index.
- Diversification
One of the key benefits of investing in a mid-cap index fund like Vanguard Mid-Cap Index is the diversification it offers. The fund holds hundreds of stocks, reducing the risk associated with individual stock holdings.
- Passive Management
Vanguard Mid-Cap Index is a passive index fund, meaning it seeks to replicate the performance of an index rather than trying to outperform it through active management. This approach typically results in lower expenses and lower portfolio turnover, which can lead to better long-term returns for investors.
- Low Cost
One of the hallmarks of Vanguard as a company is their commitment to low-cost investing. Vanguard Mid-Cap Index has a low expense ratio of 0.05%, which means investors pay just $5 in fees for every $10,000 invested.
- Tax Efficiency
Another benefit of investing in index funds like Vanguard Mid-Cap Index is tax efficiency. The fund’s low turnover rate means that it generates fewer capital gains, resulting in lower taxes for investors.
- Performance
Over the long term, mid-cap stocks have historically outperformed both large-cap and small-cap stocks. Vanguard Mid-Cap Index has performed well in line with the CRSP US Mid Cap Index, with a 10-year average annual return of 14.95%.
In conclusion, Vanguard Mid-Cap Index is a mutual fund that provides exposure to a diversified portfolio of mid-cap U.S. companies at a low cost. The fund seeks to replicate the performance of the CRSP US Mid Cap Index and has historically performed well over the long term. For investors looking to invest in mid-cap stocks, Vanguard Mid-Cap Index can be a great option due to its low expense ratio, tax efficiency, and passive management style.