I can see the ad now: "Got Mid-cap Stocks?" That is what entered my mind after doing some recent mutual fund research on historic performance of the major stock indexes. Take a look at this index comparison chart. You may be surprised by the dominance of the S&P Midcap 400 over the past 15 years:
Not only does the S&P Midcap 400 (mid-cap stock index) outperform the S&P 500 (large-cap stock index) and Russell 2000 (small-cap stock index) during the 15-year period but it also beats the major market indexes in the 3-year, 5-year and 10-year periods, based upon total annualized returns. This is significant on many levels:
- The 3-year period captures almost 100% of the current bull market, beginning March 9, 2012.
- The 5-year period includes the two contrasting economic environments of both the recent economic recovery and the Great Recession.
- The 10-year period, going back to 2002, includes the tail end of the "dot com bust" recession.
- The 15-year period reaches all the way back to the 1997, 1998 and 1999 extreme technology bull market and the two recessions and recoveries since then.
Through all of this incredible roller coaster ride of volatility, one might expect dominance to be exchanged back and forth from the S&P 500 to the S&P Midcap 400 to the Russell 2000 but mid-caps win the battle in all key time periods, as of March 31, 2012.
Can past performance be an indication of future results? Does this mean pile all your money into an S&P Midcap 400 Index fund? Not necessarily. However, it can be a clear reminder that mid-caps make a fine addition to an aggressive portfolio of mutual funds.