A second way we can
classify stocks and or funds is the market capitalization of an individual
company. First we need to define market
capitalization. This refers to the total
value of all the outstanding shares of a company. We have essentially three (3) categories of a
stock/fund. Thus it’s similar to the
style boxes which also has three.
In terms of size, we
should begin with LARGE CAP STOCKS.
These are companies that have assets valued at $10 billion or more. Some samples would be GE, Microsoft and
Wal-Mart.
In addition to the Large
there is a second category called MID CAP STOCKS. The Mid cap has total value between $2
billion to $10 billion. Keep in mind
that these are monetary values are not clear cut but simply guidelines. It’s not too difficult to cite examples of
MID CAP stocks. Kohl’s, Hartford
Financial and Royal Caribbean Cruise are companies you probably have heard of.
Lastly we have SMALL CAP
Stocks/funds. These would be companies
that have total assets under the $2 billion threshold. I can offer only one example and that would
be Michael’s Stores.
There you have it. The purpose of identifying the size of
various stocks/funds is to help you further diversify your investments. We’ve all heard the term, “Don’t put all
your eggs in one basket.” So when you
consider your investments, think of the size of the company.
As always, remember to
read a current prospectus for a detailed explanation of fund objectives, risks,
fees, charges, expenses and taxes.