Marvelous mid-caps a large-cap's best friend

In recent years, the outsized performance of the Mag 7 stocks may have resulted in portfolios that are not as diversified as investors think. 

Franklin Templeton proposes diversifying investments into mid-cap stocks to alleviate this risk. Using S&P MidCap 400 Index as an example of this opportunity, the white paper highlights how mid-caps can offer exposure to quality companies in a wide range of sectors, including cyclical areas like industrials and financials.  

Key takeaways include:

• Why the dominance of the Mag 7 has led to increased concentration risk in large-cap indices like the S&P 500—and what that means for investors.
• How US mid-cap stocks offer more balanced sector and security exposure, helping to reduce overreliance on a handful of mega-cap names.
• Mid-cap valuations are more reasonable compared to large-caps, aligning closer to historical averages and offering attractive long-term entry points.
• How a multi-factor approach to mid-cap investing—combining quality, value, momentum, and low volatility—can enhance portfolio resilience and risk-adjusted returns.

Download this detailed resource from Franklin Templeton that covers how incorporating mid-cap stocks can be used to complement large cap growth stocks and improve risk-adjusted returns.