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Small cap stocks

Small cap stocks

Small-cap stocks are shares of companies with a small market capitalization (small-cap). A stock is a small-cap stock when the total value of all the company’s outstanding shares is between $ 300 million and $ 2 billion. Everything above that is called medium and large cap.

Small-cap companies are often young companies. It has lots of growth potential, but also less stability than larger and more established companies.

The risk may be greater than with large shares, but the return may also be greater. Unless you are a very experienced investor, it is best to avoid stocks with market capitalization below $ 300 million.

Category

Market capital

Micro-cap companies

Less than $300 millions

Small-cap companies

$300 millions to $2 billions

Mid-cap companies

$2 billions to $10 billions

Large-cap companies

$10 billions to $200 billions

Mega-cap companies

More than $200 billions

Historically, since 2000, small-cap companies have surpassed mid-cap and large-cap companies over long periods by an average. 2% pr. Year. But history is often different over shorter periods (think 3-5 years or so) because small-cap companies tend to be more volatile than larger company stocks with larger ups and downs in their prices. Over longer periods, these ups and downs seem to smooth out.

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