You’ve heard the saying ‘strength lies in numbers’. Well, the stock market certainly agrees.
Stocks are grouped into three main categories of capitalisation: large-cap, mid-cap, and small-cap. Due to their size, large-cap stocks are safer but don’t always offer big growth opportunities. On the other hand, small-cap companies have more room for growth.
Tips and tricks
Think of these caps as boats. Large cruise ships (large-cap) sail along the water at a slow pace. Whereas speedboats (small-cap) are fast and nimble. In the long run, they may even outperform the cruise ship but are much riskier in a storm. So remember: the smaller the market, the higher the risk, the greater the potential for growth.