One way of classifying mutual funds is by the market capitalizations of the companies they invest in.
Mutual funds can invest in stocks and bonds of foreign corporations, or corporations in the biotechnology industry, or with any other objective they may have. But one way to manage it is by size—to capture market exposure for companies of different sizes.
The size of a company is defined by the amount of market capitalization it has, which is the number of shares outstanding multiplied by the share price. Some indexes and funds will adjust market cap rankings to give weight to “free float,” which is the amount of market capitalization that is freely trading, and is not held by other companies, governments, or founding families.
Examples of classifications by size are micro-cap, small cap, mid cap, large cap, and mega cap.
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