Why doesn’t everyone in the investing business know this? Beats the heck outta me. I’ve spoke with many, many investing pros and financial advisors about mid-cap index funds. Not one, not a single one, even knew that the S&P Mid-cap 400 has out-performed the S&P 500 (mostly large-cap companies) these past 5 years by a significant amount.

You may hear many times that if a mutual fund can beat the S&P 500, then this is a successful fund with superior management. The S&P 500 has beat over 81% of all actively managed funds over the past 5 years. And only one fund, the Legg Mason Value Trust, has beat the S&P 500 each and every year for the past 11 years.

But no one, not a single fund, beats the S&P 400 every year.

• The year, 2001, was a disappointing year for the mid-cap 400, earning only 1.3%. But the S&P 500 lost 12%.
• Over the last 5 years, with that terrible 2000-2001 period, the S&P 500 has still returned a respectable average annual return of 10%. But the mid-cap 400 has yielded an average return of 18.6% over these same 5 years.
• The mid-cap’s average annual return for 1981-2001 was a whopping 16.9%!

So … We can say:

A mid-cap index mutual fund is the ticket to your investing success.

These middle size companies are not too big, not too small, and mostly growing and gaining market share.

It’s not that this is a guarded secret. It’s just the collective ignorance of that crowd of experts.