July 8, 2026
The U.S. equity market offers diverse investment opportunities, from large, stable companies to fast-growing startups. While many investors focus on large, well-known companies or chase the allure of high-growth startups, mid cap stocks are often overlooked. Mid caps, however, should not be ignored, as over the long term, they have delivered higher risk-adjusted returns than both small and large caps.
What Defines a Mid Cap Company?
Mid cap companies are defined by a market capitalization typically between US$500 million and US$70 billion. There is usually some overlap between large and mid, and mid and small, as can be seen in market indexes like the Russell 1000 Index, where the bottom 800 companies form the Russell Midcap Index. The 800-stock overlap between the Russell 1000 and Russell Midcap Indices, however, is not as significant as it may seem. Due to weighting by market capitalization, the Russell Midcap Index only represents around 27% of the Russell 1000 (as of 12/31/2025).
Why Invest in Mid Caps?
Mid cap stocks offer a unique investment opportunity, balancing stability and growth potential as they are more established than small caps but grow faster than large caps. Often overlooked and under-researched, mid caps present opportunities for investors to find undervalued, resilient businesses with the nimbleness to thrive in changing economic conditions.
The “Sweet Spot” for Growth
Mid cap companies tend to be more stable and established than small caps but grow faster than more mature large caps, occupying a sweet spot of the enterprise life cycle with the potential for substantial growth. As they mature beyond the rapid growth phase of small caps, they become more stable and reliable while still offering greater growth prospects than large caps. This balance makes mid caps appealing for active managers, who can capitalize on market inefficiencies to identify promising companies positioned to become the next large cap success stories at attractive valuations.
Overlooked & Undervalued
Mid cap stocks are typically less researched by buy-side and sell-side analysts compared to large cap stocks, providing skilled stock pickers the chance to generate significant value.
Mid cap stocks represent a significant portion of the U.S. equity market—about 18%—but they only account for 8% of investment exposure (as of 12/31/2025). With mid caps being under-allocated and overlooked, it’s not surprising that so many investors are still unaware of the benefits of mid cap investing.
Agile & Resilient
Mid cap business models tend to be more diversified and profitable than smaller companies and less complex than large caps, giving them a greater ability to adapt to changing economic conditions.
Mid Cap Performance Over Time
The case for mid caps becomes even more compelling when examining historical performance. Over multiple long-term rolling periods, mid caps have outperformed their large and small cap counterparts a majority of the time. The chart below shows how often mid caps outperformed other parts of the market in 1, 3, 5, and 10 year windows over the past 25 years.
Mid Caps in an Investment Portfolio
Given the balance of growth and stability, we believe investors should consider a standalone allocation to mid cap stocks.
Important disclosures:
Source: Madison Asset Management, LLC, unless otherwise stated.
Index returns are shown for informational purposes only. Indexes are unmanaged and their returns include reinvestment of dividends, if applicable, but do not include any sales charges or fees as such costs would lower performance. It is not possible to invest directly in an index.
The information contained herein has been provided by Madison Investments (Canada) Ltd. and is for information purposes only. The information has been drawn from sources believed to be reliable. Graphs and charts are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk profile.
Certain statements in this document may contain forward-looking statements (“FLS”) that are predictive nature and may include words such as “expects”, “anticipates”, “intends”, “believes”, “estimates” and sim forward-looking expressions or negative versions thereof. FLS are based on current expectations and projections about future general economic, political and relevant market factors, such as interest and foreign exchange rates, equity and capital markets, the general business environment, assuming no changes to tax or other laws or government regulation or catastrophic events. Expectations and projections about future events are inherently subject to risks and uncertainties, which may be unforeseeable. Such expectations and projections may be incorrect in the future. FLS are not guarantees of future performance. Actual events could differ materially from those expressed or implied in any FLS. A number of important factors including those factors set out above can contribute to these digressions. You should avoid placing any reliance on FLS.
Outperformance of the various indices will vary based on starting points and time periods. For example, the S&P 500 Index outperformed the Russell Midcap Index from 12/31/2016 to 12/31/2019.
Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only, and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance.
S&P 500 Index: large cap market index that measures the performance of a representative sample of 500 leading companies in leading industries in the U.S.
Russell 1000 Index: measures the performance of the 1,000 largest companies in the Russell 3000® Index.
Russell 2000 Index: measures the performance of the 2,000 smallest companies in the Russell 3000® Index.
Russell Midcap Index: mid cap market index which measures the performance of the mid cap segment of the U.S. equity universe.
Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group.
Market Capitalization: the total dollar market value of a company’s outstanding shares of stock.