Economics Mutual Funds Questions
The difference between a large-cap, mid-cap, and small-cap fund lies in the market capitalization of the companies they invest in.
A large-cap fund primarily invests in companies with a large market capitalization, typically exceeding $10 billion. These companies are considered to be more established and stable, often representing industry leaders. Large-cap funds tend to offer lower risk and potential for steady returns.
A mid-cap fund focuses on companies with a medium market capitalization, usually ranging from $2 billion to $10 billion. These companies are often in a growth phase, with the potential for higher returns but also higher risk compared to large-cap funds.
A small-cap fund invests in companies with a small market capitalization, typically below $2 billion. These companies are often in the early stages of development or operate in niche markets. Small-cap funds offer the potential for significant growth but also come with higher risk due to their volatility and limited resources.
Overall, the difference between these funds lies in the size and stage of the companies they invest in, which affects the risk and potential returns associated with each fund.