Different Types and Classification of Stocks
Stocks are usually classified according to a variety of factors ranging from the size of the company to the sector. The basic classification is as per the capital involved:
These are stocks of companies that have invested a huge amount of money and the total market capitalization of these stocks is over $10 billion i.e.: the total number of shares of the company in the market multiplied by the cost of one share is greater than $10 billion. These are usually huge organizations that have grown large over a period of time. Usually it is considered extremely safe to invest in such companies as the share price does not fluctuate based on the whims and fancies of a few individuals.
Medium Cap Stocks
These are stocks of organizations that have a market capitalization between $1 billion and $10 billion. Even these are relatively large companies and though majority share holders may be able to have an impact on the share price, these are considered to be relatively safe. However, do ascertain the structure of the organization prior to investing huge amounts of money.
Low Cap Stocks
These are organizations that do not have a very high market capitalization and it is usually capped to $1 billion. There are instance when investing in these companies has given a huge return to certain investors but the truth is that the investment is almost always risky. You should invest in a small cap company, if and only if, you are sure of its growth potential.
Stocks Basics -Investment Tips
Whenever you are investing in stocks, you have to ensure that you do a thorough research about the organization. This is important as your money is at stake and everyone wants to get the best possible return on their investment. Though large sums of money can be made by investing in small cap organizations, the risk is definitely on the higher side. On the other hand, investing in large cap companies may not give you a double digit growth, but your money is in safe hands. Also, you are guaranteed to get a good return in the long run.