what are mid cap,small cap,large cap in share market. In which cap should one invest.?

Answer 1

Small, mid and large cap just refers to the market capitalization of a publicly-traded company. A market capitalization is the size (in dollar amounts) of the company's public equity.

These references will also relate to the general characteristics of a fund - large cap funds invest in large cap companies which are expected to be more stable, less risky (relatively in the equity markets, which you should always assumes certain risks). Mid-cap are moderately sized companies that have growth potential, but are more "risky" than large cap. Small cap are considered high growth, high risk because they are small and many may go out of business, but some will succeed and move up in the cap world through growth.

All asset classes are a good part of a diversified portfolio since they will not overlap (too much). Most diversified portoflios will be outweighted in large cap with small % in both mid and small.

Also, you may want to include some fixed income and cash in that portfolio mix.

Your optimal portolio diversification will depend on your risk appetite and investment horizon!

Answer 2

Market cap refers to the value of the company's shares as they are currently being traded. Small cap generally is considered as a cap of under 2 billion. Mid cap 2-10 billion. Large cap over 10 billion.

If you are a proponent of diversification, then some money should be invested in each. Over the last several years small cap have outperformed large cap by a significant amount. But that might be changing currently.
5 year annual return for small cap has been about 15% during last 5 years+- depending on the particular index.

5 year annual return for mid cap has been about 16% during the last 5 years +-.

5 year annual return for large cap has been about 11.0% during the last 5 years.

Some people think that the large caps should catch up. Maybe and maybe not. After all it is very difficult for a large cap to grow faster than the economy in general and they certainly have been doing so for the last 5 years.

Adventursome investors tipically choose small cap to invest in because the chances of a much larger return are greater. A small cap company can grow at 25% annually for 10 years. But they can also go broke very easily, especially if the economy turns down.

A mutual fund that invests only in small and mid cap companies is Royce Funds. Their PENNX has an outstanding long term track record as do several of their other funds. 15.4% annually over the past 25 years.

Keep in mind also that in the market collapse of 2000 a lot of large cap stocks became no cap stocks. Since cap is based on market capitalization, over priced stocks tend to go from large cap to no cap.

Answer 3

In this context, "cap" is short for capitalization, which is basically the total value of all shares of stock for the company. So, for example, Home Depot has slightly less than 2 billion shares of stock and the price is around $37 per share, so the capitalization is about $74 billion.

Different people use slightly different numbers to separate companies into groups. Some use $1 billion and $4 billion as the dividing lines (i.e. less than $1B is small cap, greater than $4B is large, and the ones between $1B and $4B are mid). I've seen other places that use $2B and $5B as the dividing lines.

Which one (if any) you should invest in depends on your goals, time horizon, and temperament. Historically, small cap stocks have provided somewhat higher returns, but with higher volatility. Large cap stocks are less volatile but in the long run have had slightly lower returns.

If I was investing for a long-term goal (e.g. college for my newborn, retirement in 20 years, etc.), I'd invest at least half in small-cap stocks. (That's a higher percentage than most advisers would recommend, but I'm willing to endure the ups and downs in order to get the higher return.)

If I was investing for a short-term goal (e.g. college for my 16-year-old, retirement next March), I wouldn't invest in any kind of stocks because for such a short time period, the risk of losing money is too high.

When investing in stocks, there are two rules that I think are critical to success:
1) Spread your money across many companies. Putting it all in one or even five has too much risk (because if one company goes bad, your portfolio takes a big hit). If you don't have a large amount of money to invest, I would satisfy this rule by investing in an index mutual fund or an index-based exchange traded fund (ETF) like SPY (large-cap), MDY (mid-cap), or IWM (small-cap).
2) Do not panic and take out your money when the market dives like last week. Buying only when everything looks safe and selling when it looks risky seems to me to be a surefire way to LOSE money. The best time to buy is when no one else wants to (because stocks are cheap then) and the best time to sell is when everyone else is buying (because stocks are expensive then).

Answer 4

The "cap" in question refers to the Market Capitalization of the company...meaning the Total market value of the company...meaning the current market value of the share multiplied tby the Number of outstanding shares in the market which are the number of equity shares that the company has issued over time in the Equity market.
This is a categorization/classification of the companies depending on the market capitalization.
There are basically two kinds of income that one can expect to earn from stocks.
1. Income in the form of Dividends issued annualy(usually).
2. Price appreciation of the Stock(upward movement of price of the stock).

The Large cap companies are usually the ones which have existed for a long time in the equity market. These companies usually do not see mcuh price appreciation but do distribute profit among the stockholders in form of dividends. These companies are safer to invest in for Investors who are looking at constant income source in form of dividends.
Mid cap stocks are the firms that lie in the Middle range of Market cap companies. These offer mild price appreciation and also offer dividends.
Small cap stocks are the ones that lie at the bottom of the market cap and are most prone to market index fluctuations. These are usually the stocks also known as penny stocks since they are the cheapest. These are the comanies who are in their initial phases of formation and usually raise money from stock markets to expand/adopt new practices. These companies have a relatively large gestation period. So normally they dont offer any dividends but huge amount of price appreciation. They ae most risky in terms of Market risks.
The safest are the Mid Cap Stocks. But then Stocks are a risky Business always. Be a gambler then gamble. Make the most of the Index.[;)]

Answer 5

Large caps are companies worth tens of billions of dollars. Companies like Exxon-Mobil, General Motors, and IBM.

Small caps are companies worth a few million dollars. They are new companies just starting out, that you may not have heard of.

The precise definition depends on the mutual fund or the investor.

Small, newer companies tend to grow faster, but be riskier. They tend not to pay dividends, but to have faster rising stock prices.

Larger, older companies tend to pay higher dividends, and have less volitile and less growth in their stock prices.

It all depends on your goals. Do you want a lot of risk or not? You should always try to be diversified.

Invest your first $10,000 in large cap, then your next $10,000 in small cap, then your next $10,000 in medium cap, and your next $10,000 in international stocks, then start again. Good luck.

Answer 6

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