What is the S&P Mid-Cap 400 Index?
The S&P Mid-Cap 400 Index tracks a diverse basket of medium-sized U.S. firms. A mid-cap stock is broadly defined as a company with a market capitalization ranging from about $2 billion to $10 billion.
The S&P 400 is not to be confused with the S&P 500, which is composed of large-cap stocks.
How Does the S&P Mid-Cap 400 Index Work?
This index consists of 400 equities. The stocks are chosen based on market capitalization, liquidity and industry representation. The index contains firms that are situated in size between the S&P 500 Index and the S&P Small-Cap 600 Index. It is a market-weighted index, meaning that larger firms have more influence on the index's performance than smaller ones. The average size of a firm in this index is between $1-4 billion. When taken together, the 400 components of the S&P Mid-Cap 400 Index represent about 7% of the total market value of U.S. equities.
Why Does the S&P Mid-Cap 400 Index Matter?
The S&P Mid-Cap 400 Index has historically outperformed its larger sibling, the widely quoted S&P 500. This is due to the fact that smaller firms generally outperform their larger rivals over time. Why is this the case? Well, companies often find it harder and harder to boost revenues and earnings at a fast clip as they grow and mature. Because of this, larger firms tend to grow at a slower pace than their smaller rivals.
Although it has grown in popularity in recent years, the S&P 400 remains largely overshadowed by the S&P 500. Meanwhile, investors who wish to invest in smaller firms usually choose the Russell 2000 or the S&P 600. The S&P Mid-Cap 400 Index is stuck in the middle of the market and is primarily used by fund managers. Because of this lack of visibility, the index is not as liquid as its large-cap peers.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
There aren't many things you can buy that automatically give you your money back. Think about it: When was the last time your car wrote you a check? Has...Read More →
The Semper Augustus was a beautiful flower. It had midnight-blue petals with a pure white band at the tips and crimson flashes. According to Mike Dash in his book, Tulipomania: The...Read More →
These days, investors want exposure to international markets. Luckily, the options to get exposure to foreign-based investments are about as plentiful as they have ever been. But sometimes...Read More →