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Market Cap Orientation of Index

The universe of stocks is often categorized in different ways, one of which is based upon the market capitalization of the firms associated with each stock.  Market capitalization (or “market cap”) is the value of all outstanding shares of stock of a firm, representing the total market value of the firm.

“Large Cap” stocks are those associated with firms having the largest market capitalization, typically in excess of $10 billion.  These firms are often viewed as large, stable organizations with strong market positions in their respective industries, and therefore tend to have somewhat less risk and volatility than smaller firms.  They are more likely to generate dividends, or more sizable dividends, than an otherwise comparable firm.

Large cap stock indices include:

  • S&P 500
  • NASDAQ 100
  • Dow Jones Industrial Average

“Small Cap” stocks are those associated with firms having the smallest market capitalization, typically less than $2 billion.  These firms are often viewed as “up and comers”, and therefore tend to reinvest their profits into their businesses instead of paying them out as dividends to shareholders.  Small cap stocks also tend to grow faster and have more volatility than other stocks.

Small cap stock indices include:

  • Russell 2000
  • S&P Small Cap 600
  • MSCI Small Cap 1750

“Mid Cap” stocks , as you would suspect, have characteristics that are in between those of large cap stocks and small cap stocks.

Mid cap stock indices include:

  • MSCI US Mid Cap 450
  • S&P 400 Mid Cap

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