Last week on the podcast, we discussed growth vs. value stocks. Today on the Finance Flash Go! podcast recap, it’s trap or cap time. Ready to explore the difference between small, mid, and large cap stocks? Let’s go!
(If you need a refresher on stress free stock investing, check out this post)
Listen to the full episode here!
A stock’s “cap” refers to its relative size in the market.
Large cap refers to a company with a market capitalization value of greater than $10 billion.
Market capitalization is calculated by multiplying the number of a company's shares by its stock price per share.
A company’s stock is the generally classified as large cap, mid cap or small cap.
Mid is the next size down and small is obviously the smallest.
It’s just a size thing and bigger is not always better (no puns intended!).
It's really as simple as that. That is what the “cap” means when it comes to stocks. Pretty arbitrary is you ask me, but it's important to be speaking the same language when discussing finances with others!
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2 Responses
Great podcast! Something I’m worried about is the small cap index fund in my 401(k) and the exposure to GameStop. I was reading that GameStop is the largest stock in the Russell 2000 and is a couple percent of the index. I really don’t think that Game Stop is going to be a $20 billion company 5 or 10 years from now so I feel like a sitting duck holding it in my small cap index fund as I’ve had a small cap factor tilt in my 401(k). Thinking about rebalancing to a larger index. Similarly, during your great podcast last week last week I was thinking abot how I’m not too enthusiastic about buying Tesla at $600 billion in S&P index fund so was thinking about going towards a bit of a value tilt.