SCHM Vs. IMCB: 2 Mid-Cap ETFs That Invest Based On Lesser-Known Indices

SCHM Vs. IMCB: 2 Mid-Cap ETFs That Invest Based On Lesser-Known Indices


The Schwab U.S. Mid-Cap ETF invests based on the Dow Jones U.S. Mid-Cap Total Stock Market Index.

The iShares Morningstar Mid-Cap ETF invests based on the Morningstar US Mid Cap Index.

This is my second in a series comparing ETFs that use different indices to see if performance is effected. I will review the Indices and ETFs with direct comparisons.

The two reviewed in this article, SCHM and IMCB, were the closest in CAGR after 10 years to the VO ETF, which had the best return of the Mid-Cap non-focused ETFs.

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Maria Vonotna/iStock via Getty Images (This article was co-produced with Hoya Capital Real Estate ) Introduction

I have been doing a series of articles exploring various Exchange-Traded-Funds, or ETFs, that invest in the Mid-Cap space of the US stock market. The first article, Thanks To Put Writing, I Own VXF; So A New Review Was In Order , which invests in both Mid-Cap and Small-Cap stocks, and then a follow-up article that showed focusing on just Mid-Cap stocks was worth taking a deeper dive into.

My first comparison article paired the SPDR S&P MidCap 400 ETF Trust ( MDY ) and the iShares Russell Mid-Cap ETF ( IWR ) as they invest based on well known and highly followed indices. Here, I will compare two ETFs that use less familiar indices: Schwab U.S. Mid-Cap ETF ( SCHM ), which uses the Dow Jones U.S. Mid-Cap Total Stock Market Index , and the iShares Morningstar Mid-Cap ETF ( IMCB ), which invests based on the Morningstar US Mid Cap Index . Why Mid-Cap?

With Big Tech ruling the US market over the last decade, why worry about Mid-Cap stocks is a good question. The answer is based on the market returning to its historical pattern of rewarding investors for taking more risk, which most pundits would say happens when investing in smaller stocks. PortfolioVisualizer Since 1972, Mid-Cap stocks have provided the best CAGR, Sharpe and Sortino ratios. The higher StdDev than Large-Cap stocks confirms they are risker by that measure. In theory, Small-Caps should have the best returns, and occasionally they did since 1972. Exploring the Schwab U.S. Mid-Cap ETF

Seeking Alpha describes this ETF as: Schwab U.S. Mid-Cap ETF is an exchange traded fund launched and managed by Charles Schwab Investment Management, Inc. It invests in public equity markets of the United States. The fund invests in stocks of companies operating across diversified sectors. It invests in growth and value stocks of mid-cap companies. The fund seeks to track the performance of the Dow Jones U.S. Mid-Cap Total Stock Market Index. SCHM started in 2011. SCHM has $9.8b in AUM and currently yields about 1.16%. Schwab only charges 4bps in fees, a level becoming more expected by investors for passive ETFs. Currently, SCHM is the only ETF based on the Index they picked. Understanding the Index

S&P Dow Jones has a very simple definition of their Dow Jones U.S. Mid-Cap Total Stock Market Index: The index, a member of the Dow Jones Total Stock Market Indices family, is designed to measure the performance of mid-cap U.S. equity securities. These Rules and Characteristics provide flavor to that description: Stocks: Currently is 504

The index is a sub-index of the Dow Jones U.S. Total Stock Market Index

The primary listing must be on an eligible U.S. exchange. Common stocks and REITs are eligible

The Index consists of 500 stocks selected using the following buffer rules: Current mid-cap index constituents ranked between 401 and 1,100 remain in the index. If the index does not contain 500 stocks after applying the buffer, remaining places in the index are taken by the largest non-constituent stocks ranked 501 or smaller are added until 500 stocks are included

Weighting Method: Float-adjusted market cap weighted

Annual Reconstitution: Annually in September

Rebalancing Frequency: Quarterly in March, June, September, and December

Max Market Cap: $34,235.89 Min Market Cap: $57.73 Mean Market Cap: $8,995.25 Median Market Cap: $7,967.16 spglobal Index PDF It is important to point out the sectors are not based on the more well-known GICS coding, but their own, which elsewhere is listed the Industry Classification Benchmark , or ICB, a Down Jones/FTSE joint venture. SCHM Holdings review Seeking Alpha SCHM Holdings Unlike many Large-Cap ETFs, while still the largest sector exposure, Technology stocks hold 10% less weight here than what an ETF like SPDR S&P […]

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