The mid-cap stocks it tracks hold the potential for profit — but the opportunity for growth depends largely on where the company is in its life cycle.
What is the S&P 400?
The S&P MidCap 400 is an index composed of 400 US mid-cap stocks — stocks with a valuation between $200 million and $5 billion. It’s a free-float cap-weighted index maintained by S&P Dow Jones Indexes, the same company responsible for the S&P 500 and the Dow Jones Industrial Average. Since the S&P 400 is a cap-weighted index, the stocks with the highest market cap have the most impact on its performance.
How to invest in the S&P 400
There are two ways to invest in the S&P 400: stocks and ETFs. If you’re interested in a targeted investment supporting individual companies, consider purchasing stocks. If you’d prefer more comprehensive coverage of the index, look into ETFs. To purchase stocks or ETFs, you’ll need a brokerage account. Here’s a look at the investment process:
Select an investment platform. If you don’t already hold an account, compare trading platforms to find the brokerage that best meets your needs.
Open and fund your account. Web-based brokerage applications can be completed online. You’ll be asked to fund your account before you can start trading.
Purchase your securities. Use in-platform or third-party research tools to select the stocks or ETFs you’d like to purchase.
Monitor your investments. Log in to your brokerage account to track the performance of your investments.
Compare brokerage accounts to find the right fit. Once you open an account, you can begin investing in stocks and ETFs.
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Why should I invest in the S&P 400?
Mid-cap stocks represent an investing sweet spot: They occupy the middle ground between newly established startups and blue-chip corporations. Companies in the mid-cap range can offer the best of both worlds. Like small-cap stocks, they have the potential for significant growth. But they’re less volatile and more stable as a result of an already-established business model. Investing in an index fund that focuses on mid-cap stocks is a unique opportunity that straddles growth and stability. But mid-cap stocks still have risk.
What are the risks of investing in S&P 400?
Some mid-cap stocks have plenty of growth ahead of them, while others have reached the pinnacle of their potential. Investors interested in mid-cap stocks should be wary of where the stock is in its life cycle. A mid-cap stock could be a company on the rise — or it could be a failing former large-cap stock. Before you invest, research the company you’re interested in and learn more about its history and potential.
How is the S&P 400 performing?
The graph below tracks the performance of the SPDR S&P MidCap 400 ETF (MDY) over time.
Bottom line
Investors interested in incorporating the S&P 400 into their portfolio can invest in individual stocks or index-tracking ETFs. But whether or not a mid-cap stock is a practical fit for your portfolio depends on where it is in its life cycle. Review investment accounts across multiple trading platforms to find the broker best suited to your investment goals.
Frequently asked questions
The S&P 400 is rebalanced quarterly.
S&P Dow Jones index manages the S&P 500, the S&P MidCap 400, the S&P SmallCap 600 and the S&P Composite 1500.
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Finder is not an advisor or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.
Shannon Terrell is a lead writer and spokesperson at NerdWallet and a former editor at Finder, specializing in personal finance. Her writing and analysis on investing and banking has been featured in Bloomberg, Global News, Yahoo Finance, GoBankingRates and Black Enterprise. She holds a bachelor’s degree in communications and English literature from the University of Toronto Mississauga. See full bio
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