Should Invesco S&P MidCap Quality ETF (XMHQ) Be on Your Investing Radar?

Launched on 12/01/2006, the Invesco S&P MidCap Quality ETF (XMHQ) is a passively managed exchange traded fund designed to provide a broad exposure to the Mid Cap Blend segment of the US equity market.

The fund is sponsored by Invesco. It has amassed assets over $4.92 billion, making it one of the larger ETFs attempting to match the Mid Cap Blend segment of the US equity market.

Why Mid Cap Blend

Compared to large and small cap companies, mid cap businesses tend to have higher growth prospects and are less volatile, respectively, with market capitalization between $2 billion and $10 billion. Thus, companies that fall under this category provide a stable and growth-heavy investment.

Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.25%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 5.30%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 34.80% of the portfolio. Consumer Discretionary and Financials round out the top three.

Looking at individual holdings, Carlisle Cos Inc (CSL) accounts for about 4.25% of total assets, followed by Emcor Group Inc (EME) and Docusign Inc (DOCU).

The top 10 holdings account for about 28.9% of total assets under management.

Performance and Risk

XMHQ seeks to match the performance of the S&P MIDCAP 400 QUALITY INDEX before fees and expenses. The S&P MidCap 400 Quality Index is designed to provide equal-weighted exposure to approximately 800 securities of medium-sized companies in the larger US equity market.

The ETF has lost about -1.94% so far this year and is down about -5.43% in the last one year (as of 05/27/2025). In the past 52-week period, it has traded between $82.17 and $109.35.

The ETF has a beta of 1.05 and standard deviation of 21.25% for the trailing three-year period. With about 80 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P MidCap Quality ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XMHQ is a sufficient option for those seeking exposure to the Style Box - Mid Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The Vanguard Mid-Cap ETF (VO) and the iShares Core S&P Mid-Cap ETF (IJH) track a similar index. While Vanguard Mid-Cap ETF has $78.13 billion in assets, iShares Core S&P Mid-Cap ETF has $91.20 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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This article originally published on Zacks Investment Research (zacks.com).

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