A mid-cap value fund invests in mid-cap stocks, typically issued by companies with a market capitalization between $2 billion and $10 billion USD, with the objective of identifying undervalued companies with growth potential. This type of mutual fund provides diversification and potential for upside while offering more stability than small-cap stocks. Investors must make a minimum payment and determine the value of the fund through its net asset value.
A mid-cap value fund is a type of common investment vehicle that concentrates its investments in stocks that are considered mid-cap. Although the definition differs among various investment firms, mid-cap stocks are generally considered to be issued by companies that have a market capitalization between $2 billion USD and $10 billion USD. The objective of a mid-cap value fund is to identify those mid-market companies that are undervalued by the market and have excellent growth potential. If investments within a fund grow in value, those gains are shared among all investors within the fund.
When investors try to build a portfolio, they often do so in the hope of creating exceptional diversification. But buying stocks across the entire spectrum of the market can be an expensive undertaking. Mutual funds provide an easy path to diversification, allowing people to make a single investment that touches a wide range of stocks. One such mutual fund available to investors is a mid-cap value fund, which attempts to find the most promising mid-market stocks on the market.
Any investor looking for a mid-cap value fund should have a fondness for mid-cap stocks. These stocks are typically issued by companies that have between $2 billion and $10 million in market capitalization. A company’s market capitalization is determined by taking the company’s current stock price and multiplying it by the number of outstanding shares it has issued to investors.
The market capitalization of mid-cap companies places them squarely between the so-called small-cap and large-cap companies in the stock market hierarchy. Many investors prefer mid-limits because they have more upside potential than long-established high limits. Additionally, mid-cap companies tend to provide more stability than small-cap stocks, which are often issued by start-up companies with no track record. A mid-cap value fund plays on these characteristics to try to find mid-cap stocks that may not be adequately represented by their current market price.
As with any mutual fund, a mid-cap value fund requires an investor to make a minimum payment up front to participate. The money held in a fund is managed by a fund manager, who explains the fund’s objectives to investors in a written document known as an investment prospectus. Investors determine the value of the fund by looking at its net asset value, which is a price that represents the average value of all the different stocks held in the fund.
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