UNDERSTAND THE MARKET CAPITALIZATION OF STOCKSJanuary 8, 2019
Wealth creation is a tricky process which depends largely on your market knowledge. Share market presents opportunity every now and then. But you can only act on-time if you are able to see those opportunities.
A huge variety of stocks are offered to investors who evaluate, inspect, and decide potential winners of the market.
Market capitalization is one of the popular parameters used for classifying stocks. The shares of a company are judged on the basis of overall shareholding in the market. The price of a share is multiplied to the complete number of provided shares. That is how an investor gets to know the market capitalization of a company.
In terms of market capitalization, you can find three types of stocks.
- Small-cap shares or stocks
Small-cap or small-capitalization is the name provided to small shares. These shares contain a small value in the stock market. Small companies present such shares with a capitalization that can reach Rs. 250 crores.
Who should invest in small-cap shares?
Investors who have a long-term investment plan can gain a lot from such shares that are traded in NSEand BSE. However, the investor needs to be ready to stay without current dividends and manage price volatility. Small companies grow with time and turn into big giants in their sector. So, an investor can purchase their shares at low prices and wait for a long time to turn those shares into a fortune. But it all comes down to your ability to predict the future of a new company in the share market.
Small enterprises show a lot of fluctuation in terms of share prices, revenues, and values. But if you can handle that, the long-term results can present an impressive growth.
- Mid-cap shares or stocks
As the name suggests, mid-cap shares are provided by medium-level companies. These companies present market capitalization from Rs. 250 crores to Rs. 4,000 crores.
Who should invest in mid-cap shares?
Many renowned companies come under this category. The shares of these companies are known as seasoned names. Investors who desire growth and stability at the same time find these stocks effective. The medium level companies provide a sense of safety, and improve profits for the investors.
Mid-capitalization shares include companies with steady growth performance. That is why a huge number of investors put their money in such shares.
- Large-cap shares or stocks
The largest players in the share market come under this category of shares. These are the names that you constantly hear everywhere.
Who should invest in large-cap shares?
Large companies provide higher dividends due to their established business. Investors can obtain much better dividends as compared to stocks in other categories. However, it is important to know that growth rate of large-cap shares stays a little slow. That is why many mid-cap shares offer better performance than large companies.
The type of stocks matters when you have a clear goal in mind. Make sure you choose your shares wisely and obtain results that you are looking for.