arket capitalization, or growth potential, but with higher
market cap, refers to the risk. Typically includes new or
value of a company and is young companies.
a measure of company size. Market
capitalization is the value you 3) Mid cap ($1 billion to $5
get when you multiply all the billion): Some of the safety of
outstanding shares of a stock by large caps with some of the
the price of a single share. For growth potential of small caps.
example, if a company has 10 These companies have operated in
million shares outstanding and the marketplace longer than
its share price is $5, the market smaller companies and their
cap is $50 million. The market stocks generally have less price
cap is generally listed on stock volatility.
quotes you find on the internet.
4) Large cap ($5 billion to $250
Companies are grouped into market billion): Stocks for the
cap categories which are conservative investor who wants
references to how large a company steady appreciation with greater
is measured by its market value. safety. These stocks are referred
Here are the five basic market to as "blue chips" and include
cap categories: companies such as IBM.
1) Micro cap (under $250 5) Mega cap (over $250 billion):
million): The smallest companies The largest companies that are
and riskiest stocks available. typically leaders in their
Penny stocks fall in this industry. Examples include
category. Wal-Mart and Exxon.
2) Small cap ($250 million to $1 There isn't universal agreement
billion): Stocks with higher on the exact category cutoffs.
Many investors prefer the three with lower risk while small caps
cap system of small, mid, and provide higher growth potential,
large, while others prefer to but with higher risk. Market
break it into more than the five capitalization is important to
categories listed above. consider, but don't invest just
because of it. You can determine
Market cap classification allows the value of a company in many
you to gauge the growth versus ways, and market cap is just one
risk potential of a stock. Large measure of value.
caps experience slower growth
About the Author:
You may freely reprint this article provided the following author's biography (including the live URL link) remains intact: Craig Tesch is the founder of X-investing, a free guide to investing and personal finance at http://www.xinvesting.com
Source: www.isnare.com
