You get a certain amount of diversity when you purchase a mutual fund. However, since the fund contains only growth stock, most of the stocks tend to drop together or increase in specific types of economies and you see either dramatic gain or loss.
If you purchase a growth stock mutual fund during times of a recession, you'll notice a huge increase in the value of the fund when the economy rises out of the recession.
It's always best to have both growth stock mutual funds and value stock funds in your portfolio for balance.
Market capitalization is the general agreed upon value of a company, including all of its assets. This value is then divided by the total number of stock shares issued to define a share price. For example, if a company has a market capitalization of $10 billion and $1 billion shares of stock have been issued, the stock price would be around $10 per share.
Large cap stocks are generally defined as those with market capitalizations of more than $10 billion.
A large cap is more likely to pay dividends. This is because of its stability and higher earning potential. Large cap stocks are, therefore, more popular as an income stabilization stock.
Large cap stocks are so large that they tend not to have much room to grow. They are less popular with investors looking to increase capital levels.
Some mutual fund investors are looking for rapid growth in the value of their funds. Stocks have historically offered the best long-term returns of any asset class, though it can be an up-and-down ride. Stock funds that are labeled "growth" typically invest in companies with bright prospects, while "value" funds target stocks that seem inexpensive compared with the company's earnings.
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