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
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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
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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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