Small-caps include the next hot company everyone will be talking about along with companies on the brink of bankruptcy, and ones that are prime targets for an acquisition.Īs a result, small-cap stocks can experience larger-than-average volatility, which is just another way to refer to rapid gains and losses. That’s thanks to the fairly broad range of market capitalizations included in the small-cap stock designation: Anything from about $300 million to $2 billion can be considered a small-cap stock.īecause of their size, small-cap stocks have different risks and rewards for investors than their larger counterparts.
In fact, there are more small-cap stocks than large- and mid-cap stocks combined. Small-cap stocks are the most numerous companies in the market. And in the business world, companies could look for possible acquisition opportunities within small-cap competitors.
Fund managers may craft an investment strategy to focus on particular segments of stocks based on their market cap. These composition decisions directly impact which stocks are included in any index funds you own.Īctively managed funds rely on market cap designations as well. Index providers also use market cap to determine which companies should be included in benchmarks. Grouping companies of similar sizes together allows you to better compare their stocks and performance. Market capitalization data is helpful for investors when they are evaluating the growth and risk prospects of stocks to include in their portfolios. A company’s size in terms of market capitalization doesn’t tell its whole story, but market cap information is useful for a variety of key decisions. Market cap is generally used to divide stocks into three categories based on size: large-, mid- and small-caps. Market cap data is generally available for publicly traded companies on any website that provides real-time stock information. You can calculate market cap by multiplying a company’s current stock price by the total number of shares outstanding.
Market capitalization measures a publicly traded company’s total market value.