You may have heard the words Large Cap, Mid Cap, And Small-Cap on different business channels. In today’s article, I will be explaining to you the difference between Large Cap, Mid Cap, and Small Cap Companies.
Every company has its market capitalization which is calculated by multiplying the price of each share by the total number of outstanding shares of that company. Generally, according to market capitalization, we classify these companies into large-cap companies, mid-cap companies, and large-cap companies. Along with market capitalization, this classification also subjects to a company’s rank in the benchmark indices.
A company having a market capitalization of more than 20,000 crores can be considered as a large-cap company. For example, Reliance Industries Ltd. is a large-cap company which is having a market capitalization of 1,369,615 crores (As of 2nd July 2021)
A company having a market capitalization above Rs. 5,000 crore and below 20,000 Crore is called a Mid Cap company. For example, Castrol India Ltd. is a mid-cap company with a market capitalization of 14,406 Cr. (As of 2nd July 2021)
A company which has a market capitalization below 5000 crores can be called a Small Cap company. For example, these companies are heavily reactive to market volatility. For example, Mazagon Dock Shipbuilders Ltd. Is a small-cap company with a market capitalization of 4,962 cr (As of 2nd July 2021). In India, more than 95% of the companies are considered Small-Cap Companies.
Generally, many investors tend to invest in these stocks for a longer term to spread the risks associated with them and also to generate substantial returns.
So, if you are willing to invest in the stock market but you are confused about where to invest whether in Large Cap, Mid Cap, or Large Cap then let me tell you a simple solution for this problem. Take investment decisions in any of the above on the basis of your age and the risk you are willing to take.
For example, if you are young, then you can invest a greater portion of your portfolio in Mid Cap and Small Cap Companies but, if you are older in age then you should invest a large percentage of your portfolio in Large Cap Companies and some percentage of your portfolio in Mid Cap Companies but before investing in any company it is important that you should do your own analysis.
So, this was detailed information about the Large Cap, Mid Cap, and Small Cap Stocks. I hope, through this article, I was able to add value to your knowledge. If you are interested in knowing more about the Basics of the Stock Market, then do check out our previous blog of the series, “Best Beginners Guide to The Stock Market || Module No.03|| How to Open a Demat Account.” Also, if you have any doubt regarding this concept then, please post it in the comment section.
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