For long term financial goals, investment strategy, understanding the rapport between company sizes, return potential and risk is critical. With that better understanding, you will well organized balance stock portfolio that includes a mixture of market caps. The market cap refer to over-all market value of company’s outstanding shares. It is obtained by multiplying the market price of share with total number of outstanding shares. For investors, it is crucial to understand market value of company. Market cap measures the total worth of company as well as its future prospects.
On the basis of market cap, companies are categorized as mega cap, large cap, mid cap, small cap, micro cap and nano cap.
Mega cap – companies with market worth of $200 billion or higher are included in this category. By market value, they are major widely traded companies and usually characterizes leader of market or particular industry sector. Large companies like Apple Inc. (market cap $1.045 trillion) and online retail giant Amazon.com (market worth $856 billion) are included in this category.
Large cap – companies with market worth of $10 billion to $200 billion are included in large cap category. Companies like General Electric Co. (market worth $115 billion) and International Business Machine Corp. (IBM, market worth $130 billion) falls in this category.
Mid cap – companies with market worth range from $2billion to $10 billion are included in mid cap. Companies of mid cap are considered more volatile as compare to mega and large cap companies. The Snap Inc. with $8.41 billion market worth and Juniper Network Inc. with market worth of $9.52 billion are included in mid cap category.
Small cap. Companies with market value range from $300 million to $2 billion falls in small cap category. These companies are considered relatively young and have promising growth potential as compare to old industries which may have lost market value in recent times. The OPKO Health Inc. (market value 1.94 billion) and Bed Bath & Beyond Inc. (market worth 1.93 billion) falls in small cap category.
Micro cap – companies with market worth between $50 million to $300 million falls in this category. Such companies usually consisting of penny stocks. The growth potential of mid cap companies is high if they flourished, while downscale prospective is similarly worse if they completely fails in hitting the bulls eye.
Nano cap – companies with market worth of below $50 million are included in this category. Same like micro-cap companies, they have high upward and downsize potential, so these are considered high risk, high reward companies.