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An excerpt from a MF article, be sure to read the article as they refer to the risk and downside to Small Cap investing as well.

"The size and structure of most mutual funds and a pesky SEC regulation make it hard for funds to establish meaningful positions in small-caps. In order to buy a position large enough to make a difference to their fund's performance, they would have to buy 10% or 20% of a small-cap company (which their own guidelines frequently restrict them from doing).

Before they can do that, though, they have to file with the SEC. By that time, they've already tipped their hand to the market and inflated the previously attractive price by buying 5% of the company. Individual investors who have the ability to spot promising companies can get in before the institutions do. When institutions do get in, they'll do so in a big way, buying many shares and pushing up the share price."

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