What is Mid Cap Stocks ?
Mid-cap stock fund is a type of stock fund which capitalizes its money in mid-sized companies with the capital ranging from $2 billion to $10 billion in market cap. It is calculated by multiplying the number of company’s shares outstanding by the price of the stock. As the name itself explains, mid cap companies are those companies which are between large cap and small cap companies. It should be considered that the differentiation of large cap, mid cap and small caps are only estimation that changes over time and its definition varies among the investors in the investment business. Publicly traded companies are grouped into three different market caps, large market cap stock, small cap stocks and mid cap stocks.
Large cap stocks are defined as those companies with market caps above $10 million. These companies are generally stable and dominant. These kinds of stocks hold up better even at the times of depression but at the same timothy tend to underperform small cap stocks when economy overcomes recession. These are the least risky kind of investment. Mid cap stocks are defined as a company with market caps between $2 billion and $10 billion and are riskier than large cap stock. They also offer more potential than large cap stocks.
Small cap stocks are those stocks with the capitalization less than $2 billion. These are small companies with significant potential of growth but also possess great risk of failure and are more risky than that of mid and large cap stocks. The smallest versions of small cap stock are micro cap stocks starting from $50 million to $2 billion. It is not possible to know when a market will favor. An investor with long time limit willing to take more risk for higher returns can hold on to small and mid cap stocks and those investors with less time frame can hold on to large cap stocks for more stable dividend. These are one of the finest share market tips.