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I've always been somewhat underweighted in large caps (futilely fighting the tape). In recent years I've maintained my md cap weighting but reduced small caps, shifting some of their weight to large caps (growing more cautious as one ages). Though still keeping the faith in mid caps.
Interesting statistic - "According to Morningstar's classification, the top 70% of the total U.S. market capitalization is categorized as large-cap, the next 20% is considered mid-cap, and the subsequent 7% falls under the small-cap category. [9.5% in 'extended small cap'] This allocation method offers a dynamic view, considering the overall market landscape."
In comparison, the S&P 500 covers 80% of the market. That means that a portion of this index reaches into what M* would call mid cap. Alternatively, the M* large cap boxes contain a smaller portion of the total market ("just" 70%) than one might think.
The larger you go, the greater the return over the past ten years, the lower the volatility, the better the risk/reward ratio. Interestingly, the S&P 500, even though it includes some "mid caps" has superior best and worst years (compared with megacaps) and a lower max drawdown. That suggests that there might actually be something to this midcap stuff. At least as a diversifier.
The iShares S&P 500 ex S&P 100 ETf (XOEF) seeks to track the investment results of an index composed of the large capitalization U.S. equities within the S&P 500 Index excluding companies within the S&P 100 Index.
This newer ETf could be an option for investors who wish to avoid the largest stocks in the S&P 500 while seeking a mid-cap tilt. M* shows an average market cap of $56.37 billion and their Style Box indicates that 60% of the portfolio is in mid-cap stocks (12/18/2025).
Edit/Add: I opted to go the S&P index route years ago and own IVOO (S&P 400) and VTMSX (S&P 600, tax-managed). I previously held various S&P 500 index funds. Most of my funds, however, are actively managed.
This is another subject that needs attention. Are MC a better choice than LC? As usual, it depends. Would you hold MC for the next several decades? Probably not. Would you hold them sometimes? Of course.
So, it's a timing problem based on active investment, finding better categories, and switching. The next level is finding great risk/reward funds regardless of categories. If I invested in stocks, I would look at ALT fund like QLENX or TIBIX. This has been my style for over 25 years. Basically, why act too early and risk missing significant performance? You need to see clear evidence that one fund or category is outperforming another before making a move. BTW, I never owned a MC fund.
@msf said, "I've always been somewhat underweighted in large caps (futilely fighting the tape)" Yeah. That goes double here.
I think a collection of small and / or mid caps is a good idea for a small portion of one's portfolio today. My BARF basket has 10 (individual stock) holdings and comprises 7% of the portfolio. I'd venture to say that 7 or 8 of those fall in the small to mid cap area. Individually, scary. But as a collection not hard to ride.
Perhaps noteworthy - James Stack, whom I subscribe to & read (InvesTech Research), recently recommended to his readers a small allocation to TRMCX. I say "noteworthy" because having read him for years I cannot remember his embracing any OEF. He's pretty much adhered to ETFs.
Hopefully I'm not being redundant here. I can never remember these designations and so frequently have to refer to charts like this one:
mega-cap: market value of $200 billion or more large-cap: market value between $10 billion and $200 billion mid-cap: market value between $2 billion and $10 billion small-cap: market value between $250 million and $2 billion micro-cap: market value of less than $250 million
Values for market cap levels (e.g., small, mid, large) will vary depending on the source. I can never remember the absolute values or the differences between various sources. Thanks for the chart!
Yes, the linked source notes that exact amounts vary by source.
I was a bit surprised when I looked up 3 of the 10 BARF basket holdings. Larger then I'd assumed. All 3 are considered large cap - but at the lower end of the range.
AJG $65 Bil HEINY $45.5 Bil TROW $22.7 Bil
In contrast, NWL is but $1.6 Bil and I believe the others are more along that line..
I let go of my small caps 3-4 years ago, before their outsized LT outperformance reverted to mean. I held my mid caps a bit longer, and finally let them go for the same reasons. I had OTCFX and RPMGX for decades. I will need to see a track record of momentum to get back into either. FOMO is not going to draw me in. I am even avoiding extended market index funds, at this point.
I always have something in small and midcaps. I don't claim foresight to know when they will go in or out of style. Some of them (VSMIX) are doing better than others (FMIMX and XHMQ) these days.
If you add the equity style box to your views at M* you might be surprised how much mid cap you already own.
Comments
We stay out of the smaller cap for several years. Perhaps oversea is no where as concentrated in US.
Interesting statistic - "According to Morningstar's classification, the top 70% of the total U.S. market capitalization is categorized as large-cap, the next 20% is considered mid-cap, and the subsequent 7% falls under the small-cap category. [9.5% in 'extended small cap'] This allocation method offers a dynamic view, considering the overall market landscape."
https://www.vaneck.com/us/en/blogs/moat-investing/understanding-market-capitalization/
In comparison, the S&P 500 covers 80% of the market. That means that a portion of this index reaches into what M* would call mid cap. Alternatively, the M* large cap boxes contain a smaller portion of the total market ("just" 70%) than one might think.
You can see evidence of this by comparing performance of M* US extended small cap index (iShares M* small cap ISCB), M* US mid cap index (iShares M* mid cap ISMB), and M* US large cap index (using Vanguard Megacap MGC - largest 70% - as proxy for M* index), with SPY.
Portfolio Visualizer comparison
The larger you go, the greater the return over the past ten years, the lower the volatility, the better the risk/reward ratio. Interestingly, the S&P 500, even though it includes some "mid caps" has superior best and worst years (compared with megacaps) and a lower max drawdown. That suggests that there might actually be something to this midcap stuff. At least as a diversifier.
composed of the large capitalization U.S. equities within the S&P 500 Index excluding companies
within the S&P 100 Index.
This newer ETf could be an option for investors who wish to avoid the largest stocks in the S&P 500
while seeking a mid-cap tilt.
M* shows an average market cap of $56.37 billion and their Style Box indicates that 60% of the portfolio
is in mid-cap stocks (12/18/2025).
Edit/Add: I opted to go the S&P index route years ago and own IVOO (S&P 400)
and VTMSX (S&P 600, tax-managed). I previously held various S&P 500 index funds.
Most of my funds, however, are actively managed.
Are MC a better choice than LC? As usual, it depends.
Would you hold MC for the next several decades? Probably not.
Would you hold them sometimes? Of course.
So, it's a timing problem based on active investment, finding better categories, and switching.
The next level is finding great risk/reward funds regardless of categories.
If I invested in stocks, I would look at ALT fund like QLENX or TIBIX. This has been my style for over 25 years.
Basically, why act too early and risk missing significant performance? You need to see clear evidence that one fund or category is outperforming another before making a move.
BTW, I never owned a MC fund.
I think a collection of small and / or mid caps is a good idea for a small portion of one's portfolio today. My BARF basket has 10 (individual stock) holdings and comprises 7% of the portfolio. I'd venture to say that 7 or 8 of those fall in the small to mid cap area. Individually, scary. But as a collection not hard to ride.
Perhaps noteworthy - James Stack, whom I subscribe to & read (InvesTech Research), recently recommended to his readers a small allocation to TRMCX. I say "noteworthy" because having read him for years I cannot remember his embracing any OEF. He's pretty much adhered to ETFs.
mega-cap: market value of $200 billion or more
large-cap: market value between $10 billion and $200 billion
mid-cap: market value between $2 billion and $10 billion
small-cap: market value between $250 million and $2 billion
micro-cap: market value of less than $250 million
Source
I can never remember the absolute values or the differences between various sources.
Thanks for the chart!
I was a bit surprised when I looked up 3 of the 10 BARF basket holdings. Larger then I'd assumed. All 3 are considered large cap - but at the lower end of the range.
AJG $65 Bil
HEINY $45.5 Bil
TROW $22.7 Bil
In contrast, NWL is but $1.6 Bil and I believe the others are more along that line..
If you add the equity style box to your views at M* you might be surprised how much mid cap you already own.