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Vanguard Mid-Cap Index Fund ETF Shares

VO:NYSE

equity ETF | passive | Vanguard | Tracks CRSP US Mid Cap Index

Market Price

US$299.75 (26 Jan 2026)

+8.08% (YoY)

NAV

US$298.63

+0.38% Premium

Yield

1.52%

+7.00% (YoY)

Expense Ratio

0.04%

-89% vs Avg: 0.38%

Box Set (ETF)

⚡ Executive Summary

📊 The Bottom Line

This ETF tracks the CRSP US Mid Cap Index, offering broad and cost-effective exposure to US mid-sized companies. With its ultra-low 0.04% expense ratio and diversified portfolio, it serves as a robust core holding for mid-cap allocation. The bull case anticipates NAV reaching US$359.70, while the bear case suggests a potential drop to US$254.79 over the next 12-18 months.

⚖️ Risk vs Reward

The underlying mid-cap holdings trade at a P/E of 22.9x, reflecting a moderate valuation that has increased from early 2024 but is generally reasonable within its historical context. Compared to large-cap segments, mid-caps typically present a higher growth potential alongside increased volatility. The fund's passive strategy minimizes specific stock-picking risks, but it remains susceptible to broader economic shifts affecting mid-sized companies. The risk/reward balance suggests potential for appreciation driven by economic growth, tempered by sensitivity to interest rate changes and cyclical sector exposure.

🚀 Why VO Could Soar

• Sustained economic growth could significantly boost mid-cap corporate earnings by an additional 5-7% above current projections, translating to a 10-15% NAV appreciation for the ETF.
• A potential market rotation from overvalued large-cap stocks into relatively more value-oriented mid-caps could expand P/E multiples by 15-20%, driving a 10-12% upside in NAV.
• Federal Reserve rate cuts would improve financing conditions for mid-cap companies, potentially leading to an 8-10% NAV increase due to enhanced investor appeal.

⚠️ What Could Go Wrong

• An unexpected economic slowdown could severely impact VO's significant holdings in cyclical sectors, potentially causing a 15-20% decline in earnings and a 10-15% drop in NAV.
• Persistent high inflation leading to prolonged higher interest rates could increase borrowing costs for mid-cap companies, resulting in a 12-18% NAV decrease.
• Elevated market volatility tends to disproportionately affect mid-cap stocks compared to large-caps, potentially triggering a sharp 10-12% NAV drawdown in risk-off environments.

🏢 Fund Overview

What Are You Actually Buying

This ETF primarily offers diversified exposure to US mid-capitalization equities, specifically tracking the CRSP US Mid Cap Index.
Mid-cap companies are generally characterized by a balance of established business models and significant growth potential, positioning them between the stability of large-caps and the higher volatility of small-caps.
The fund targets stocks that represent the 70th to 85th percentile of the US stock market by market capitalization, employing a full-replication strategy to match the index's performance efficiently.

Market Dynamics & Outlook

The mid-cap market is considered efficient, often challenging active management strategies to consistently outperform passive index replication over the long term.
VO's portfolio tends to hold slightly larger mid-cap companies (average market cap around US$36 billion as of May 2025) compared to some peers, which may contribute to relatively lower volatility.
While mid-caps can provide robust growth, they are susceptible to greater volatility than large-cap segments during economic downturns and may carry concentration risks in cyclical sectors like Industrials and Consumer Discretionary.

🎯 Why This Matters

VO offers a strategically positioned investment for investors aiming for growth opportunities beyond mega-cap stocks without fully embracing the elevated risks of small-cap companies. Its low expense ratio and broad diversification within the mid-cap segment make it an an attractive core holding.

📈 Valuation & Analysis

Historical Performance

YTD

+2.93%

+11.68%

Yearly Growth (3Y)

+14.29%

Yearly Growth (5Y)

+8.61%

Yearly Growth (10Y)

+10.92%

Yearly Growth (Since Inception)

+9.89%

Current Valuation

The Vanguard Mid-Cap Index Fund ETF (VO) trades at an aggregate price-to-earnings (P/E) ratio of 22.9x and a price-to-book (P/B) ratio of 3.1x as of December 31, 2025. Historically, this valuation is higher than the 19.3x P/E observed in early 2024, at which point it was noted to be above the average of its mid-cap peers. The current valuation suggests a moderately valued market segment, potentially reflecting recent strong performance and growth expectations. The ETF currently offers a dividend yield of 1.53%, providing some income to investors.

The Bull Case - Upside to

Sustained Economic Growth Boosting Mid-Cap Earnings

Medium Probability

A continued robust U.S. economic expansion could drive mid-cap earnings growth by an additional 5-7% above current projections, potentially pushing the ETF's NAV up by 10-15% over 12-18 months as corporate profitability improves.

Rotation into Undervalued Mid-Caps

Medium Probability

Should investors rotate from historically expensive large-cap growth stocks into relatively more value-oriented mid-caps, this demand shift could expand mid-cap P/E multiples by 15-20%, leading to a 10-12% upside for VO's NAV.

Decreased Interest Rate Sensitivity

High Probability

If the Federal Reserve signals or implements rate cuts, mid-cap companies, often more sensitive to financing costs, could see improved borrowing conditions and higher investor appeal, contributing to a 8-10% NAV appreciation.

The Bear Case - Downside to

Economic Slowdown Impacting Cyclical Sectors

Medium Probability

An unexpected economic downturn or recession would disproportionately affect VO's significant holdings in cyclical sectors like Industrials and Consumer Discretionary, potentially leading to a 15-20% decline in earnings and a 10-15% drop in NAV.

Persistent Inflation and Higher-for-Longer Rates

Medium Probability

If inflation remains elevated, prompting the Federal Reserve to maintain higher interest rates for longer, mid-cap companies facing higher borrowing costs and reduced consumer spending could see a 12-18% NAV decrease.

Increased Volatility in Mid-Cap Segment

High Probability

Historically, mid-cap stocks exhibit higher volatility than large-caps during periods of market stress. A surge in overall market uncertainty could lead to a magnified sell-off in mid-caps, resulting in a 10-12% NAV drawdown.

Risk/Reward Assessment

The Vanguard Mid-Cap ETF (VO) presents a compelling risk/reward profile for investors seeking a balance between growth and stability. On the upside, sustained economic growth and a potential rotation away from richly valued large-caps could significantly boost mid-cap earnings and valuations. A favorable interest rate environment, characterized by easing monetary policy, would also likely provide tailwinds for this segment. However, investors must acknowledge the inherent risks. A significant economic slowdown would disproportionately impact VO's exposure to cyclical sectors. Furthermore, persistent high inflation leading to a 'higher-for-longer' interest rate scenario could constrain mid-cap companies. Given mid-caps' historical tendency for higher volatility than large-caps, periods of market uncertainty could lead to more pronounced drawdowns. The diversified nature of VO helps mitigate single-stock risk, but the fund remains exposed to broader economic and market trends affecting the mid-cap universe.

Peer Comparison

The Vanguard Mid-Cap ETF (VO) stands out among its peers primarily due to its ultra-low expense ratio of 0.04%, significantly undercutting many competitors and translating directly into higher net returns over time. Its efficient, full-replication strategy consistently tracks the broad CRSP US Mid Cap Index, providing comprehensive market-cap-weighted exposure to the mid-cap segment. While other ETFs like IJH and SCHM also offer low-cost exposure, VO's established track record and massive asset base ensure superior liquidity and tight bid-ask spreads, making it highly efficient for trading. Investors seeking broad, low-cost access to the U.S. mid-cap market with minimal tracking error will find VO to be a premier choice.

Fund	Expense Ratio	AUM (B)	1Y Return	3Y Return	5Y Return	Yield
Vanguard Mid-Cap Index Fund ETF Shares (VO) ⭐	4.00%	US$198.7B	11.68%	14.29%	8.61%	0.02%
iShares Core S&P Mid-Cap ETF (IJH)	5.00%	US$108.7B	7.46%	12.52%	9.07%	0.01%
Schwab U.S. Mid-Cap ETF (SCHM)	4.00%	US$13.0B	10.14%	12.91%	7.32%	0.01%
SPDR S&P Midcap 400 ETF Trust (MDY)	24.00%	US$24.9B	7.20%	12.22%	8.84%	0.01%

🎯 Why This Matters

This comparative analysis underscores VO's leadership in the US mid-cap equity space, particularly for cost-conscious investors seeking broad, passive index exposure. Its competitive expense ratio and strong long-term performance differentiate it, while its substantial AUM provides liquidity advantages. Investors prioritizing long-term, low-cost market access with efficient execution should consider VO as a primary option, acknowledging peers also offer compelling, albeit sometimes slightly different, mid-cap strategies.

📊 Appendix

Top 10 Holdings (80+ of ETF Value)

#	Ticker	Logo	Name	Sector	Weight
1	CEG	C	Constellation Energy Corp	Utilities	1.2%
2	NEM	N	Newmont Corporation	Basic Materials	1.2%
3	HOOD	R	Robinhood Markets Inc	Financials	1.0%
4	CRH	C	CRH plc	Industrials	0.9%
5	HWM	H	Howmet Aerospace Inc	Industrials	0.9%
6	DASH	D	DoorDash Inc	Consumer Cyclical	0.8%
7	GM	G	General Motors Company	Consumer Cyclical	0.8%
8	TDG	T	TransDigm Group Incorporated	Industrials	0.8%
9	CMI	C	Cummins Inc	Industrials	0.8%
10	RCL	R	Royal Caribbean Cruises Ltd	Consumer Cyclical	0.8%

Fund Mechanics

How It Works

The Vanguard Mid-Cap Index Fund ETF (VO) operates with a passive management approach, aiming to precisely track the performance of the CRSP US Mid Cap Index. This index is designed to accurately represent the mid-capitalization segment of the U.S. equity market, encompassing stocks that fall between the 70th and 85th percentile of the total U.S. stock market by market capitalization. Vanguard employs a full-replication strategy whenever feasible, meaning the fund invests in all the stocks that comprise the index, in approximately the same proportions as their weighting in the index. This methodology is chosen to minimize tracking error and ensure that the ETF's performance closely mirrors that of its benchmark. The index undergoes quarterly rebalancing to maintain its target market exposure and adjust to changes in company market capitalizations.

Holdings Breakdown

Number of Holdings

288

Top 10 Concentration

910.0%

Turnover Rate

16%

Category	Weight	Description
Industrials	19.7%
Consumer Cyclical	15.5%
Financials	13.9%
Technology	13.4%
Utilities	8.9%
Healthcare	7.9%
Energy	6.6%
Real Estate	5.7%
Consumer Defensive	5.0%
Basic Materials	2.7%
Communication Services	0.9%

Cost Efficiency

Expense Ratio

0.04%

Median Bid-Ask Spread

0.010%

Expense Ratio History

Year	Expense Ratio
2025	0.04%
2024	0.04%
2023	0.04%

Performance History

Year	ETF Return	Benchmark Return	Tracking Diff	Volatility	Max Drawdown	Sharpe Ratio
2025	11.68%	11.70%	-0.02%	N/A	N/A	N/A
2024	15.23%	15.25%	-0.02%	N/A	N/A	N/A
2023	15.99%	15.98%	0.01%	N/A	N/A	N/A
2022	-18.68%	-18.68%	0.00%	N/A	N/A	N/A
2021	24.52%	24.52%	0.00%	N/A	N/A	N/A

Annualized Return Since Inception

9.89%

Detailed Peer Comparison

Ticker	Name	Issuer	Exp Ratio	AUM (B)	1Y	3Y	5Y	Yield	StdDev 3Y	Sharpe 3Y	Spread
VO ⭐	Vanguard Mid-Cap Index Fund ETF Shares	Vanguard	0.04%	US$198.7B	11.7%	14.3%	8.6%	0.02%	0.15%	0.63	0.010%
IJH	iShares Core S&P Mid-Cap ETF	iShares	0.05%	US$108.7B	7.5%	12.5%	9.1%	0.01%	N/A	N/A	N/A
SCHM	Schwab U.S. Mid-Cap ETF	Schwab ETFs	0.04%	US$13.0B	10.1%	12.9%	7.3%	0.01%	N/A	N/A	N/A
MDY	SPDR S&P Midcap 400 ETF Trust	State Street	0.24%	US$24.9B	7.2%	12.2%	8.8%	0.01%	N/A	N/A	N/A
Category Average			0.38%	—	0.1%	0.1%	0.1%	0.01%	—	N/A	—

Risk Metrics

Beta

1.04

Alpha

0.00

R-Squared

0.78

Standard Deviation

1 Year	3 Years	5 Years	10 Years
N/A	0.15%	N/A	N/A

Sharpe Ratio

1Y	3Y	5Y	10Y
N/A	0.63	N/A	N/A

Sortino Ratio

3 Years	5 Years
N/A	N/A

Maximum Drawdown

1 Year	3 Years	5 Years	Since Inception
N/A	N/A	N/A	0.54%

Correlations

S&P 500

0.86

Liquidity & Trading

Volume

Avg Daily Shares

766,093

Avg Daily Dollar Volume

US$0.0M

Trend

stable

Bid-Ask Spread

Metric	Value
Median (Percent)	0.010%
Median (Dollar)	US$0.03
During Hours	N/A
At Close	N/A
Volatility	low

Premium/Discount to NAV

Metric	Value
Current	0.00%
30-Day Average	N/A
1-Year Average	N/A
Standard Deviation	N/A
Max Premium (1Y)	N/A
Max Discount (1Y)	N/A

Creation/Redemption Activity

Trend

increasing

Net Flows

Period	Net Flow
1 Month	US$0.0M
1 Quarter	US$0.0M
1 Year	US$0.0M

⚠️ Disclaimer: This ETF research report is for informational and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell securities. EC² Invest is not a registered investment advisor. All data is sourced from public sources and may contain errors. Past performance does not guarantee future results. ETF investing involves risk, including possible loss of principal. Always conduct your own research and consult with a qualified financial professional before making investment decisions.