Ryland Goldman - Friday, April 30th, 2021
Companies come in all different shapes and sizes. Apple is a company worth a whopping $2.24 trillion dollars, while a company like Alaska Airlines is worth "only" $8.63 billion. The value of a company is known as its market capitalization, or market cap for short.
The various market caps are normally sorted into two main categories (large and small), but can be further classified into five (mega, large, mid, small, micro). Continuing with the companies above, Apple would be a large company, and Alaska Airlines would be a small company.
Depending on where you look, the range of sizes within a category could be different. Below, I've listed the average from my research, along with a description.
Mega-Cap (Over $200 Billion)
Lots of established companies, such as Walmart or Disney, are mega-caps. Because they are so big, they don't have much room to grow compared to smaller ones, yet are still great investments because of their stability. A company like Microsoft isn't too likely to go out of business anytime soon.
Large-Cap ($10 Billion to $200 Billion)
Most of your favorite brands are large-caps, like McDonalds and Starbucks. These companies are similar to mega-caps, but they might still be approaching their full potential.
Mid-Cap ($2 Billion to $10 Billion)
Mid-caps are in the sweet spot between large-caps and small-caps. They are small enough where they can grow to a huge company and make investors loads of money, yet still multibillion dollar corporations that have the capital to expand their business.
Small-Cap ($500 Million to $2 Billion)
As size decreases, volatility increases. Small caps are risky investments because you have the potential to lose a good amount of your money if the company doesn't succeed. However, as with mid-caps and micro-caps, they are starting out and could become the next Google.
Micro-Cap (Under $500 Million)
Micro-caps are the most risky category on this page. A tiny company can go under really fast if things go wrong. Anything from a lawsuit to a fire in a production plant could cost you your entire investment. Growing to a mid-cap could create 1,000% returns, which you won't see in larger companies.
Next: What are sectors?