Financial Crusader Term of The Week(ish) – Market Cap

Market Capitalization (Large Cap, Small Cap, Etc)

Market capitalization refers to the market value of a company. If all the shares outstanding are multiplied by the current price per share, you have the market cap of the company.

So, when some dude at the bank (or wherever you get your financial advice) tells you you should “diversify your portfolio”, the Dude means you should invest in a range of different sized (in terms of value) companies.

Simple stated, in North America there are 3 main categories: Large Cap ($5 billion and up), Mid Cap ($1 billion to $5 billion) and Small Cap (less than $1 billion).
So, Microsoft has a Market cap of about $305.6 billion (large cap–some might say giant cap), and Wendy’s has a market cap of about $4 billion (mid cap).

To complicate things, there are different sub categories: Value, Growth and Blend. We’ll talk about those later. But, if life depends on you picking the right mutual funds RIGHT NOW, go with Blend, in Small, Mid and Large.

Dude at the Bank Diversifying means owning small cap, mid cap, and large cap stocks (or mutual funds—see upcoming article) in both growth and value (or blend…which is, yep, you guessed it, growth + value!!…I like to call it “grawlue”).

Than again, if life depends on you picking the right funds right now (RIGHT NOW)…you might want to hire a financial planner. But make sure to ask them a lot of questions. Find out how they make money. Remember, you are trusting them with your money, not giving them your money.

Definition for market capitalization at Free Dictionary, and Investor Words.

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