Small-Capitalization Stock: Shares of relatively small publicly traded corporations with a total market capitalization of less than $2.3 billion are typically considered small-capitalization, or small-cap, stocks. That number is not used uniformly, however, and you may find small-cap defined as below $1.5 billion. Market capitalization is calculated by multiplying the market price per share by the number of outstanding shares. Small-cap stocks, which are tracked by the Russell 2000 Index, tend to be issued by young, potentially fast-growing companies. Over the long term — though not in every period — small-cap stocks as a group have produced stronger returns than any other investment category. Mutual funds that invest in this type of stock are known as small-cap funds.

 

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