Ranking ETFs as they become widespread will enable us to put together a plan that can deliver good risk adjusted returns. So far we have completed the large cap ETFs and this brings us to the middle of the Mid Cap ETFs.
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In our last article we ranked the Mid Cap Blend ETFs and we placed MDY and IJH as the top two and the ones that will go forward to being placed in the optimized portfolio when the time comes. In this article, we move on to mid cap growth ETFs with the goal of providing the same ranking.
We will follow the same process -- rank and determine a cutoff based on trading volume for liquidity and low trading friction, then rank them based on their returns and assign a score.
We start with a fuller list of mid cap growth ETFs:
Symbol | Name |
IWP | iShares Russell Midcap Growth |
IJK | iShares S&P MidCap 400 Growth |
VOT | Vanguard Mid-Cap Growth ETF |
RFG | Rydex S&P Midcap 400 Pure Grow |
JKH | iShares Morningstar Mid Growth |
PWJ | PowerShares Dynamic Mid Cap Gr |
MDYG | SPDR S&P 400 Mid Cap Growth ET |
IVOG | Vanguard S&P Mid-Cap 400 Growthj |
We reviewed daily trading volume data and applied a cutoff below 200,000. Note that this is a lower threshold than the large cap ETFs but we will trade volume for having enough ETFs to make a reasonable comparison. In this case, with a 200,000 cutoff, we were only left with three so we relaxed down to 100,000 to let a third one in. In volume order (high to low it is IJK, IWP, VOT). Symbol Name 5 Yr AR% 3yr AR% 1yr AR% iShares S&P MidCap 400 Growth 5.81% 7.46% 41.87% iShares Russell Midcap Growth 3.86% 3.73% 37.72% Vanguard Mid-Cap Growth NA 3.26% 42.68%
It turns out that the returns performance follows the trading volume curve. VOT is disadvantaged because it is relatively new but we want to see a longer history of returns if possible.
Ticker | Property | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 |
Draw Down(%) | 12.65 | 8.15 | 14.05 | 10.36 | 54.57 | 24.04 | 16.68 | 2.81 | |
Return(%) | 13.23 | 12.53 | 5.41 | 11.81 | (37.78) | 40.14 | 30.73 | 3.80 | |
Draw Down(%) | 14.19 | 7.95 | 14.00 | 11.22 | 55.53 | 23.20 | 16.25 | 2.58 | |
Return(%) | 14.65 | 11.20 | 9.70 | 10.55 | (45.09) | 44.95 | 25.70 | 4.73 | |
Draw Down(%) | NA | NA | 3.09 | 12.22 | 59.30 | 22.37 | 16.23 | 2.76 | |
Return(%) | NA | NA | 8.28 | 16.88 | (47.69) | 44.47 | 29.49 | 4.75 |
IJK and IWP are the winners that make it through to inclusion. As we continue through this, we will have to give some thought to pruning the number of ETFs to keep the numbers reasonable so it could be that just IJK makes it into the plan of funds.
We can now summarize the Mid Cap blend and growth selections:
If we are forced to reduce the selections to one each, IJK and MDY would make it.
In the next article, we will finish off Mid Cap ETFs with the Value subclass.
Disclosure: I am long IJR and IWO.
