Market Capitalization

Indicator Description

In most publications or references market cap is broken down into the mega-cap, large-cap, mid-cap, small-cap, micro-cap, and nano-cap. Market Cap is a measurement of business as total market value of all of the outstanding shares at a given time, and can be used to compare different companies based on their size.

Market Cap 
 = 
Shares Outstanding 
X  
Share Price 

Market Capitalization is the total market value of a company's equity. It is one of many ways to value a company and is calculated by multiplying the price of the stock by the number of shares issued. If a firm has one type of stock its market capitalization will be the current market share price multiplied by the number of shares. However, if a company has multiple types of equities then the market cap will be the total of the market caps of the different types of shares.

Market Capitalization In A Nutshell

The most popular of the capitalizations is the large cap stocks, which are the Apples and Facebooks of the world. These companies are the ones that many people invest and trade in because they are most familiar with their brand and what they do. If you look at the Dow Jones Industrial Average, these are all large cap stocks. The S&P 500 is also made up of some large cap stocks.

Market cap is the total amount shares times the current price of the stock. This is important to know because many traders and investor categorize companies by their market cap.

Closer Look at Market Capitalization

Taking the next step, there is the mid cap stocks, which many are companies that we may have heard of but are unsure what they do. Mid cap stocks are still solid companies and many have been around for quite some time, but it also could include some newer companies with stock prices that are lower. People who are willing to take on a little more risk for potentially more return on their investment, the mid cap level is the place to look.

Then there is small and micro cap stocks, which are companies who are very small compared and have low stock prices typically. These companies are smaller and typically do not have the reputation of being a sturdy investment. However, the potential for serious returns is there, but the risk level here is the greatest at this level looking at the capitalization levels.

When you are building a portfolio or looking at funds, it is important to stop and think how much of each level you want in your portfolio. Someone who is just starting out may be more apt to look at the mid and small cap area because it can generate greater returns and the risk tolerance is greater when first starting out. If it is towards the end of your investing life, you may want to stick with large cap stocks as these are the most likely to perform well.

Be sure to take a look at your current portfolio holdings and see how they are allocated among the three different capitalization levels and see if you are comfortable with where they line up. If you are unable to take the time, you may be interested in putting your money in mutual funds that cover these three areas as they can give you sector exposure without the company specific risk. Take the time and understand each area and see if you could reallocate your portfolio to limit risk and grow returns.

Other Suggestions

Analyzing currently trending equities could be an opportunity to develop a better portfolio based on different market momentums that they can trigger. Utilizing the top trending stocks is also useful when creating a market-neutral strategy or pair trading technique involving a short or a long position in a currently trending equity.

Use Investing Themes to Complement your positions

You can quickly originate your optimal portfoio using our predefined set of ideas and optimize them against your very unique investing style. A single investing idea is a collection of funds, stocks, ETFs, or cryptocurrencies that are programmatically selected from a pull of investment themes. After you determine your investment opportunity, you can then find an optimal portfolio that will maximize potential returns on the chosen idea or minimize its exposure to market volatility.

Did You Try This Idea?

Run Utilities Thematic Idea Now

Utilities
Utilities Theme
Highly leveraged corporations that deliver utilities such as power, water or gas to public or business. The Utilities theme has 30 constituents at this time.
You can either use a buy-and-hold strategy to lock in the entire theme or actively trade it to take advantage of the short-term price volatility of individual constituents. Macroaxis can help you discover thousands of investment opportunities in different asset classes. In addition, you can partner with us for reliable portfolio optimization as you plan to utilize Utilities Theme or any other thematic opportunities.
View All  Next Launch
Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

Other Complementary Tools

Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Portfolio Comparator
Compare the composition, asset allocations and performance of any two portfolios in your account
Go
Equity Valuation
Check real value of public entities based on technical and fundamental data
Go
Global Markets Map
Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes
Go
Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Go
Cryptocurrency Center
Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency
Go
Financial Widgets
Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets
Go
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
Go
Content Syndication
Quickly integrate customizable finance content to your own investment portal
Go
Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Go