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Capitalization

A capitalization fund is a mutual fund (a collective investment arrangement) which focuses on purchasing stocks in companies of a particular size as calculated by the company's market capitalization. This is a measure of corporate size determined by multiplying the current company stock price by the number of outstanding shares.

Capitalization mutual funds are designated as investing in micro-cap, small-cap, mid-cap, and large-cap stocks. The capitalization of these funds would respectively equal: under $100 million, under $1 billion, between $1 billion to $5 billion, and in excess of $5 billion. (The term "blue chip" is a common synonym for large-cap stocks whereas micro-cap stocks are often referred to as "penny stock." Occasionally stocks will also be referred to as nano-cap which is a valuation under $50 million in capitalization.)

Although there are no hard and set definitions for the division of capitalization, these figures are the rough working norm of the trading world.

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