What does Market capitalisation mean and how important is it for investors to understand?
Market capitalization is the total value stock price of
all the shares of a company that have been authorized, issued, and purchased by investors and are held by them.
Calculating the value of Apple shares by multiplying the number of shares times the cost per share is like calculating the market capitalization of a company.
market caps are important as help investors understand the size of a company and its maturity.
Market cap can also be a tool for gauging the riskiness of an investment.
As of now, there are three main categories of market cap.
Small-cap: Between $300 million and $2 billion
Mid-cap: Between $2 billion and $10 billion
Large cap: $10 billion+
Each category offers its risks and rewards.
Generally speaking, small-cap stocks have a greater runway for growth, but can also be riskier investments because of the uncertainty of the companies’ future performance. Large-cap stocks are usually considered safe.