Choosing the Right Capitalization

Small, mid and large cap stocks all have their individual benefits. But which one is right for you?

One size usually doesn’t fit all, especially when it comes to the stock market. Choosing the right sized company or fund can be a tricky prospect. “How are the different levels defined?” and “What are the pros and cons of each type?” are two major questions many people have. When looking at market capitalization, it can be difficult to decide which size is right. So here’s an overview of all three major categories of market capitalization.

Small Caps

Small cap stocks are companies that typically have a small market capitalization (usually somewhere between $300 million and $2 billion, but definitions vary). Market capitalization, simply put, is the price of the company’s stock, multiplied by the number of shares outstanding. It’s basically the value the market places on a company.

With the potential for growth comes the potential for risk as well. All portfolios should be properly diversified to help reduce overall portfolio risk. Investing in small cap stocks comes with an additional set of risks unique to these types of investments. Consequently, any money you invest in small caps should be money you’re prepared to expose to these risks. Small cap stocks are also more difficult to research and choose precisely because of their obscurity.

Mid Caps

The definition of a mid cap varies greatly depending upon whom you ask. Some define mid caps as being companies with a market capitalization between $1.5 billion and $5 billion. Others bump that number up a bit and define them as being between $2 billion and $10 billion. In the end, it depends on exactly whom you ask. Mid caps are generally thought of as having the growth potential of a small cap and some of the stability of a large cap.

Large Caps

Large caps also vary in range, depending on who’s answering. In many cases, large caps, or “blue-chip” stocks, are stocks with a market capitalization between $8 billion and $100-200 billion. This range includes some of the giants. With the larger cap companies, you get more proven stability and less volatility. But in many cases, that means less glamorous returns and a smaller chance for growth.

As with the other two levels of capitalization, it’s not a one size fits all. Some investors want the proven reliability of the big names. Others value the large caps because they’ve already experienced their growing pains and are now established. Many large cap companies also do a great deal of work around the world, which means an added flavor of global diversification. Numerous developing countries are seeing the birth of a middle-class (China, Brazil, etc.), and many large U.S. companies are seizing the day and expanding their reach.

Each type of market capitalization category comes with its own unique risks and rewards. Trying to balance the risks and rewards of all of the assets in your portfolio can be tricky. Consulting with a financial professional can help you identify which investments may be appropriate for your situation. Article by Securities America

Back to my page

Featured Posts
Recent Posts
Search By Tags
Follow Us
  • Facebook Basic Square
  • Twitter Basic Square
  • Google+ Basic Square

801 S. Fillmore, Suite 530

Amarillo, Texas 79101

Click to check the background​
of this firm FINRA's BrokerCheck

The BBB has determined this business meets accreditation standards, which include a commitment to make a good faith effort to resolve any consumer complaints. BBB Accredited Businesses pay a fee for accreditation review/monitoring and for support of BBB services to the public. BBB accreditation does not mean that th ebusiness products or services have been evlauted or endorsed by the BBB, or that the BBB has made a determination as to the business product quality or competency in performing services.

Navigation Financial Group is not a CPA Firm. Advisor Representatives are Registered Representatives of and offer securities through Securities America, Inc., member FINRA/SIPC. Planning and Advisory Services available through Securities America Advisors, Inc. $ymbil is offered by Ladenburg Thalmann Asset Management, Inc. (LTAM). Navigation Financial Group and its affiliates are independent of Securities America and LTAM. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. This site is published for residents of the United States and is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security or product that may be referenced herein. Persons mentioned on this website may only offer services and transact business and/or respond to inquiries in states or jurisdictions in which they have been properly registered or are exempt from registration. Not all products and services referenced on this site are available in every state, jurisdiction or from every person listed. Not FDIC Insured, No Bank Guarantees, May Lose Value. Not a Deposit and Not Insured by any Government Agency. As of January 1, 2020, the California Consumer Privacy Act (CCPA) suggests the following link as an extra measure to safeguard your data: Do not sell my personal inforamation.

© 2020   |   All Rights Reserved