Charles Schwab & Co. has introduced a small-cap equity fund that will use its in-house equity ratings. The Schwab Small-Cap Equity Fund is designed for a broad range of investors interested in long-term capital growth of small companies through a single investment.

The fund will invest a minumum of 80% of its assets in small cap U.S. stocks with a market capitalization range of $100 million to $1.5 billion. The in-house Schwab Equity Model Development ratings system will play a major role to the porfolio manager in what stocks are to be bought and sold. The system assigns a letter grade to over 3,000 U.S. Stocks. Stocks in the S&P SmallCap index will also fall under the umbrella of companies for potential selection.

The fund will be offered on two levels: Investor Shares have an initial investment requirement of $2,500, with additional investments to come in $500 denominations. The expense ratio for this level is 1.30%

The second level is $50,000 with additional investments to come in $1,000 increments. The expense ratio for this level of investment is slightly lower at 1.12%. Schwab believes this emphasis on the small-cap will be of significant interest to investors. According to Randy Merk, president of Charles Schwab Investment Management, "Small-cap stocks have long been considered an attractive investment since small companies, by virtue of their size, tend to have more growth potential."

Currently, Schwab offers two other small-cap funds, including the Schwab Small-Cap Index Fund and the Schwab Small-Cap MarketMasters Fund.

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