IJH Holders Booked a $116,670 Gain on $300,000, but the Promotion Rule Sells Their Best Winners

Say you own a growing mid-sized company through the iShares Core S&P Mid-Cap ETF (NYSEARCA:IJH). For years, the stock rises. Then the company gets big enough to join the S&P 500, and your fund sells every share it owns. A written rule forces that sale. With $300,000 in this fund, the rule determines when you sell your best performers.

What You Actually Pay Each Year

The expense ratio is the annual fee, shown as a percentage of your money. IJH charges 0.05%, according to its July 31, 2026 prospectus. The cost comes to $5 a year per $10,000, or $150 a year on $300,000. Few funds charge less. The fund held $124.3 billion in net assets and 410 positions as of June 30, 2026.

Returns have been solid. Say you put $300,000 into IJH on November 11, 2021. Using adjusted prices (which account for dividends and splits), you would have about $416,670 today. That is a gain of $116,670, or 38.89%. Over ten years, the fund returned 177.01%. You made money. The hidden cost is the upside the rule may have left on the table.

How the Promotion Rule Costs You

IJH tracks the S&P MidCap 400, an index of mid-sized U.S. companies. Size here means market capitalization: the share price multiplied by the number of shares. S&P keeps its large-cap, mid-cap, and small-cap indexes separate, so a company can belong to only one. When S&P’s index committee promotes a mid-cap to the S&P 500, the company leaves the 400 on the same day it joins. IJH copies its index, so it has to sell.

The rule makes sense on paper because it keeps a mid-cap fund full of mid-caps. The timing works against you, though. The fund owns the company while it rises, then sells right when the market has shown it a winner. Every gain after the promotion goes to large-cap fund holders. These winners also never become big positions. IJH’s largest holding was only 0.86% of assets on June 30, 2026.

Costs the Fact Sheet Leaves Out

Three smaller costs come with the rule. First, crowded trades. Every fund that tracks the 400 sells the same stock on the same day, while S&P 500 funds buy it, and that rush can move the price before your fund trades. Second, taxes.

Selling a stock at a profit can create a capital gain. ETFs often use in-kind redemptions (handing over shares instead of cash) to limit this, but the prospectus still warns that distributions “may be taxable to you as ordinary income or capital gains.” Third, overlap. If you also own an S&P 500 fund, the promoted company shows up there, usually at a much smaller weight.

Cheaper Lookalikes Follow the Same Rule

The SPDR Portfolio S&P 400 Mid Cap ETF (NYSEARCA:SPMD) and the Vanguard S&P Mid-Cap 400 ETF (NYSEARCA:IVOO) track the same index, so the same promotion rule applies to them. Their results look almost identical. From January 2, 2026 through November 10, 2026, IJH returned 11.67%, and SPMD returned 11.74%. SPMD’s three largest stocks on June 30 had weights of 0.84%, 0.83%, and 0.77%. IJH held the same three companies at 0.84%, 0.83%, and 0.77%. Switching between these funds can save a little on fees (check each fund’s current fact sheet), but the promotion rule stays the same. The Vanguard Mid-Cap ETF (NYSEARCA:VO) follows a CRSP mid-cap index, which uses its own method to move companies between size groups. What you get instead is a different mix of stocks and different sector weights.

Questions to Ask Before Retirement

Matching IJH with a large-cap fund such as the iShares Core S&P 500 ETF (NYSEARCA:IVV) means a promoted company moves from one fund to the other and stays in your portfolio. You still own its later run, but at the small weight the S&P 500 gives a newcomer. If you are at or near retirement, ask yourself three things. Does your portfolio still hold the companies your mid-cap fund has to sell? How much of that upside actually reaches you at large-cap weights? Could moving money between funds trigger a taxable sale you didn’t plan for?

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