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I am extremely excited to announce my new e-book, SOLID STOCK SELECTION is now available !! Click here to find out more.
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7/30/06 Large Cap vs. Small Cap
What do these terms mean? When listening to or reading reports from analysts the terms large and small cap are often mentioned in reference to a particular company. The terms refer to the capitalization of the company, which probably still has people scratching their heads. Capitalization is a word used to describe the worth of a company calculated by the value of all its shares. In other words, how much is the company worth looking at the number of shares multiplied by its’ share price. To give an example, a company with a million shares valued at one dollar each has a market cap of one million dollars. A real example is IBM, with 1.52 billion shares each valued at $76.73 has a market cap of 116.6 billion dollars. That is considered a large cap company. (Some would call it a mega cap company.) In all actuality there are large, mid, small, micro and nano-caps. The ‘dividing’ line is blurred a bit because prices fluctuate and borderline companies can be considered in either category on any given day. Large cap is loosely defined as over ten billion, mid between 2 and 10 billion, small between 300 million and 2 billion, micro 50 to 300 million and nano anything under 50 million. All these numbers are in US dollars, so convert away, those who deal in other currencies. Now, what does all that stuff mean to you? It can mean the stability of a company, the league they “play” in, or whether a stock is a conservative investment, or more risky. Larger companies are generally considered more conservative, smaller companies more risky. So what to do? Depending on your age you should have a percentage of each. Older folks obviously mostly invest more conservatively because they have less time cushion to make up for a loss. Younger investors generally have a higher level of risk, hoping to make a greater return on investment, and knowing that they have more time to invest and make up any losses they may incur. This is not to say you can’t lose money on large caps, just that because those stocks are on everybody’s radar, the companies are more cautious in their decisions. That's all for another week. Solid investing to all. Rob
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Want a scholarship into the Millionaire Mind Intensive worth $2590? http://www.secretsofthemillionairemind.com The columns, articles, message board posts and/or any other features provided on Wealth Training Source are provided for personal finance and investment information and are not to be construed as investment advice. Under no circumstances does the information in this content represent a recommendation to buy, sell or hold any security. The views and opinions expressed in an article or column are the author’s own and there is no implied endorsement by Robert Britt of any advice or trading strategy copyright Robert E. Britt 2006 |
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