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Should iShares Morningstar MidCap Growth ETF (IMCG) Be on Your Investing Radar?

Looking for broad exposure to the Mid Cap Growth segment of the US equity market? You should consider the iShares Morningstar MidCap Growth ETF (IMCG), a passively managed exchange traded fund launched on 06/28/2004.

The fund is sponsored by Blackrock. It has amassed assets over $1.04 billion, making it one of the average sized ETFs attempting to match the Mid Cap Growth segment of the US equity market.

Why Mid Cap Growth

Mid cap companies have market capitalization between $2 billion and $10 billion. They usually have higher growth prospects than large cap companies and are less volatile than small cap companies. These types of companies, then, have a good balance of stability and growth potential.

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Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Additionally, growth stocks have a greater level of risk associated with them. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other environments.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.06%, making it the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.72%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 23.50% of the portfolio. Industrials and Healthcare round out the top three.

Looking at individual holdings, Hilton Worldwide Holdings Inc (HLT) accounts for about 1.05% of total assets, followed by Datadog Inc Class A (DDOG) and Resmed Inc (RMD).

The top 10 holdings account for about 8.61% of total assets under management.

Performance and Risk

IMCG seeks to match the performance of the MORNINGSTAR US MID CAP BROAD GROWTH INDX before fees and expenses. The Morningstar US Mid Cap Broad Growth Index comprises of mid-capitalization U.S. equities that exhibit growth characteristics.

The ETF has lost about -25.14% so far this year and is down about -20.43% in the last one year (as of 06/27/2022). In the past 52-week period, it has traded between $49.67 and $76.33.

The ETF has a beta of 1.08 and standard deviation of 26.76% for the trailing three-year period. With about 372 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Morningstar MidCap Growth ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IMCG is a good option for those seeking exposure to the Style Box - Mid Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.

The Vanguard MidCap Growth ETF (VOT) and the iShares Russell MidCap Growth ETF (IWP) track a similar index. While Vanguard MidCap Growth ETF has $9.28 billion in assets, iShares Russell MidCap Growth ETF has $11.55 billion. VOT has an expense ratio of 0.07% and IWP charges 0.23%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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