Types of Stocks

There are many types of stocks. Below we discuss the basic types of stocks you will often encounter when investing in the stock market. There are also several ways to divide stocks into different types. The most common way to classify the types of stocks are by their capitalization.

What is capitalization?

Capitalization is the number of shares issued by the corporation times the current market value of the stock. We will discuss capitalization in another section.

Capitalization and types of stocks

There are different definitions to the size of stock capitalization. However, below is an accepted standard of classifying the types of stocks. There are other types of stocks but these are the most common and basic ones

Large cap stocks

Large cap stocks usually have market capitalization of over $10 billion. Large cap stocks are the stocks of the largest companies listed on the stock market. These companies are not expected to grow as fast as smaller companies do but because of their size and long standing, they are believed to be stable stocks.

Midcap stocks

Midcap stocks usually have market capitalization of between $2 billion and $10 billion. Most stocks are classified as midcap stocks. These stocks are those of medium sized companies. Midcap stocks act similar to small cap stocks in the way that they emphasize in growth rather than value or dividends.

Small cap stocks

Small cap stocks usually have market capitalization of less than $2 billion. Small cap stocks are supposedly the most risky (compared to midcap stocks and large cap stocks) because they are stocks of small companies.

International stocks

International stocks are not for everyone. Some people don't like the risks that come with investing in international stocks. Others thrive in the high returns of international stocks.

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