Market capitalization

Market capitalization of Vanguard funds

Vanguard uses the Russell 3000 index as the basis for determining the market capitalization of its domestic stock funds and variable annuity portfolios, Vanguard ETF® Shares, and the target domestic stock portion of its balanced and global funds. Vanguard funds with an average weighted market capitalization greater than or equal to the market capitalization of the 200th largest stock in the index are considered large-capitalization funds. Funds with an average weighted market capitalization between the 201st and 1,000th largest stocks in the index are considered mid-capitalization funds. If the average weighted market capitalization of the fund falls below that of the 1,000th largest stock in the index, the fund is considered a small-capitalization fund.

Market capitalization of Non-Vanguard funds

Morningstar ties market capitalization to the relative movements of the market. The top 5% of the 5,000 largest stocks in Morningstar's equity database are classified as large-capitalization; the next 15% of the 5,000 are mid-capitalization; and the remaining 80% (as well as companies that fall outside the largest 5000) are small-capitalization. Morningstar determines a fund's market capitalization by ranking the stocks in a fund's portfolio from the largest market-capitalized stock to the smallest, then calculating the average weighted market capitalization of the stocks in the middle quintile (middle 40th to 60th percentile) of the portfolio. After a fund's market capitalization has been determined, Morningstar places the fund in the large-, mid-, or small-capitalization group.

Investments are subject to market risk. Prices of mid- and small-cap stocks often fluctuate more than those of large-company stocks.