Difference Between Large Cap, Mid-Cap & Small Cap Stocks

Large Cap Stock

The shares that are obtained from well-established companies fall under the category of large cap stocks. But any well established company does not always fall under the large cap stock. The market capitalization is evaluated by multiplying the stock price with the outstanding number of stocks and sorted according to the amount that is generated thereof. When a company’s market cap exceeds 20,000 cr, than it is usually regarded as a large cap company and its stocks are considered large cap stocks in Indian share market.

Companies with large cap stocks are thought of as the industry leaders and are quite renowned in their field and are quite established.

Mid Cap Stock

A mid cap company has a market capitalization of about 5000 cr and exceeding up to 20,000 cr. They may eventually become large cap companies with time due to increased profits, market share and production turnover. They tend to be positioned in the centre of the growth curve, though they are riskier than large cap stocks to invest in, they still continue to grow. In a bracket of half a decade, a promising mid cap company can provide mid cap stocks that can grow exponentially. Though they have a smaller clientele, profit, employees and the like, they have the potential to make it big!

Small Cap Stock

The markets that have low market capitalization or those that have a turnover of about 2 billion dollars or less are called small cap companies. These companies usually comprise of start-ups, or really old companies that have a small-sized industry. A thorough research must be conducted if one wants to invest in small cap stocks as they can beget greater returns provided that they can survive in the market as they hardly become popular in a short span of time. They take a really extensive period of time to grow in their industrial field and hence generate lower revenues as their clients and employees are not that extensive. They garner a moderate to high risk for investors.

Fundamental Differences Between The 3 Types of Stocks

  • The turnover of all the mentioned three market caps and their stocks differ in volume and profit.
  • The smaller the cap, the higher the risk the stock entails due to its positional volatility. Investors are required to put in their money in accordance to their appetite.
  • Large cap companies mostly make their reports and information publicly available, unlike mid cap companies or small cap companies.
  • The financial stronghold is the parameter of any company to pull through a bearish curve, and usually, large cap stocks provide this convenience.
  • Not a lot of people will know about small cap stocks unlike mid cap stocks or large cap stocks, so it is best to invest according to the risk-taking ability.
  • Large cap stocks can be judged easily by investors as they are public with the information, but mid cap stocks or small cap stocks do not always make their caveats public.

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