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Overview: Investment Types Continued Beyond the Basics - Stocks Now that you have learned the basics, lets move on to a more in-depth explanation of some common terms. MARKET CAPITALIZATION - The terms large cap, mid cap or small cap refer to a company’s market capitalization. The company communicates into which category it falls. Market capitalization is calculated by multiplying the number of shares outstanding by the current market price of the shares. Large cap = $5 billion and above Mid cap = Between $1 billion and $5 billion Small cap = Below $1 billion INVESTMENT STYLE: GROWTH VS. VALUE - Investment style refers to the manner in which investment managers select various stocks. Growth Style - Investment managers select stocks of companies with faster growing earnings. It is anticipated that the earnings will drive up the stock prices. Value Style - Investment managers select stocks of established companies with undervalued stock prices. The managers are bargain hunters anticipating that the stock price will rise closer to their true market value. DOMESTIC AND FOREIGN STOCKS - Domestic stocks are issued by companies located inside the United States. Foreign stocks are issued by companies located outside the United States. Keep in mind that there are increased risks associated with foreign investing, and fund unit values will fluctuate with market conditions, currencies, and the economic and political climate where investments are made. Some of the risks include higher trading costs, currency fluctuations and different political structures. INDUSTRY SECTOR STOCKS - Industry sector stocks are stocks in industries in a specific sector of the economy such as technology, healthcare or financial. By investing in just one sector, you increase the level of risk in your portfolio because of cyclical trends in the market. Higher potential return generally involves greater risk, and short-term volatility is not uncommon when investing in a sector fund. < BACK NEXT > #40131