Market cap meaning：Market Capitalisation Definition

Pros and cons of choosing stocks by market cap Pros of choosing stocks by market cap

Market capitalisation is commonly used to help inform decisions about which stock to invest in because it gives investors information about the relative size of one company versus another. This is why investors tend to split stocks into categories based on their market capitalisation: large-cap, mid-cap and small-cap.

Large-cap companies typically have a market capitalisation of $10 billion or more, mid-cap companies between $2 billion and $10 billion, and small-cap companies between $300 million and $2 billion. The cut-off values of each category can be vague, and differ from country to country.

Market capitalisation is a simple and relatively effective way to assess risk. Investing in large-cap companies is thought to provide long-term rewards and less risk, as the companies are well established and stable. Mid-cap companies have great growth potential but tend to be riskier than ...