Company Size

Company Size — When making investment choices, check the size chart

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Company Size — When making investment choices, check the size chart

Capitalization is an investment term that describes a method of estimating the value of a publically traded company. Sales volume, total assets and market capitalization is used to determine a company’s size.

Company's Market Capitalization
A company's capitalization is equal to its total number of outstanding shares multiplied by the current cost per share.

Do the cap math

To figure out a company’s market capitalization (or market cap), you multiply the total number of outstanding shares (those that have been purchased and are currently held by investors) by the current market price of one share.

Example:
Company A has 25 million outstanding shares, and the current share price is $100. Market capitalization is $2.5 billion (25,000,000 x $100 = $2,500,000,000).

Select your cap size

Investors like to categorize things for convenience, so companies are generally considered either small-cap, mid-cap or large-cap based on their market cap calculation as shown above. This cap size is one of the factors that can help you determine the risk and return characteristics for a stock or mutual fund.

While opinions vary on exactly where to draw the lines between small-, mid- and large-cap companies, generally, the breakdown goes like this:

 

Company SizeMarket Cap RangeCharacteristics

Small-Cap

Under $2 billion

Small-cap stock prices can be more volatile (higher risk) than mid-caps and large-caps. But they may provide more opportunities for growth since many small-caps are in the early stages of their development.

Mid-Cap

Between $2 billion and $10 billion

As the label suggests, these companies are in the middle ground. They often share some of the risk/return characteristics of both small-caps and large-caps.

Large-Cap

Over $10 billion

These are the big industry leaders. Often called “blue chip” stocks, large-caps tend to be well-established, stable companies that may be growing more slowly. Their financial strength and size generally makes them less risky than small-caps.

Spread the wealth

Small-cap, mid-cap and large-cap stocks tend to perform different under similar market conditions. It may make sense to own a combination of all three cap sizes as you build a diversified retirement investment strategy.

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