What is MID? (Pros, Cons, and Strategies)

Investors looking for growth and positive environmental and social outcomes often consider MID, the American Century Mid Cap Growth Impact ETF. This investment vehicle aims to provide market returns while supporting companies committed to making a positive impact. Today, we'll explore what MID is, along with its benefits, drawbacks, and strategies for incorporating it into your investment portfolio.

What is MID?

MID is an actively managed ETF that focuses on mid-cap growth securities. MID stands for American Century Mid Cap Growth Impact ETF.

This ETF invests in companies with mid-sized market capitalizations that are also evaluated for their commitment to environmental, social, and governance (ESG) standards. MID marries growth investment strategies with an impact investment framework, aiming to achieve both financial returns and social good.

Key Features of MID

• Companies with mid-sized market capitalizations
• Focus on growth potential, selecting companies with robust revenue and earnings growth
• Incorporation of ESG criteria into investment decisions
• Active management approach, allowing for selective and strategic investment decisions

The fund managers utilize American Century's proprietary Impact Metric system to rank and assess companies on their environmental and social impact, while thoroughly evaluating their potential for earnings growth.

MID Composition

MID typically includes companies from various sectors such as technology, healthcare, and consumer discretionary. Examples of its holdings might include innovative tech firms, biotech companies developing new treatments, or consumer goods companies focusing on sustainable practices.

Pros of MID

Growth Potential

MID aims to invest in companies with strong growth prospects. Mid-cap companies often occupy a sweet spot between stable large caps and high-growth small caps. They can offer a great combination of stability and growth, potentially leading to higher returns over the long run.

Positive Impact Investment

For investors concerned about social and environmental issues, MID offers the satisfaction of knowing that their investment is aligned with positive outcomes. Companies in the portfolio are selected based not only on their growth potential but also on their commitment to positive ESG practices.

Active Management

Unlike passive ETFs that track an index, MID is actively managed, allowing experienced fund managers to make strategic decisions. This can lead to better performance, especially in volatile markets where the ability to pick winners is critical.

Cons of MID

Higher Expense Ratios

Active management comes with higher fees. MID's expense ratio tends to be higher than passive ETFs due to the costs associated with active research and management. This can eat into returns, particularly over the long term.

Potentially Higher Volatility

Mid-cap stocks can be more volatile than their large-cap counterparts. While they offer higher growth potential, they also come with higher risk. This can lead to larger fluctuations in the value of your investment.

Not Free from Subjectivity

The impact evaluation process can be somewhat subjective. Different investors or funds may have varying standards for what constitutes a positive impact, leading to potential disagreements or disappointment with the selected companies.

MID Investment Strategies

MID is best suited for investors with a growth mindset who also want to make a positive impact through their investments. Given the nature of mid-cap stocks and the active management strategy, careful consideration is needed to maximize returns and align investments with personal values.

Long-term Growth Strategy

For those with a long-term investment horizon, MID could be a valuable component of a diversified portfolio. The focus on mid-cap growth stocks means that it could offer significant upside over a 10-year or more period. Regular contributions and dividend reinvestment can help leverage compounding returns.

Due to its growth orientation, combining MID with other defensive or income-generating investments can create a balanced portfolio that withstands various market conditions.

Impact-Driven Portfolio

If social and environmental impact is a priority, MID fits well into an ESG-focused investment strategy. Consider pairing it with other ESG funds that focus on different sectors or cap sizes to diversify both impact and risk.

Regularly review the impact reports provided by American Century to ensure the fund continues to meet your personal ESG criteria and investment objectives.

Active Rebalancing

Given the nature of MID's holdings and potential volatility, active or regular rebalancing of your portfolio may be necessary. Rebalancing ensures that the percentage of your portfolio dedicated to mid-cap growth remains in line with your risk tolerance and strategic goals.

Consider setting up annual or semi-annual reviews to reassess your asset allocation and make adjustments based on market conditions and performance.

Conclusion

MID, the American Century Mid Cap Growth Impact ETF, offers a novel approach to blending growth investing with positive social and environmental impact. While it comes with higher costs and the potential for volatility, its focus on mid-cap growth and ESG criteria can make it an attractive option for long-term, impact-focused investors.

By understanding the essential features and strategizing accordingly, investors can effectively utilize MID to achieve both financial returns and a positive impact on society and the environment.