Some Of The Indices Used In Categorizing Large Cap Companies
Large cap companies, otherwise known as big cap
, are those companies that sell their shares in the stock exchange market, and whose total value exceeds $10 billion. This is the highest categorization of companies that trade in the stock market. Large cap companies have found their way into the global market and you will hardly miss them in majority of the countries all over the world. A clear example of such a company is Microsoft. As big as the amount of money they invest in the market is, so are their profits and this is why many investors go for their shares.As many investors can testify or bear witness, large cap stocks, shares and bonds are less risky than those of mid and small cap companies. The larger a company is, the less likely it is for it to collapse. However, their potential for growth is very limited. Remember that, these are companies that are at their highest level of capitalization. Large cap companies also have a tendency to stagnate at a certain level of returns and be overtaken by mid cap companies.
To avoid this from happening, the companies normally invest in a variety of other types of stocks and securities so as to diversify and to increase the potential for huge returns. As an investor, it is always advisable to review different companies that are classified under the large cap category before making any investment decision. This is because, not all companies can be trusted to survive the harsh economic times that are characteristic of the stock market every now and then.
The most recommendable companies to go for are the blue chip companies. These are those that have been in the market for long enough and their performance can be attributed to good governance and investor loyalty. Other indicators that one should look for include performance of the company in other economic regions. If it does not seem to be doing well in other regions, you should find out why and try to predict its future performance in the region you are in.
The ownership of a large cap company is normally by the government, a corporation of even an individual. Depending on ownership, the company is then indexed, such that, it becomes easier for it to be categorized in comparison with other companies that fall in the same category. Some of the indices that are used in the process include S&P 500, DAX and MSCI. In the process of being indexed, the company goes through the market capitalization process, which means that, the value of the company is the factor that determines how the stocks of the company will be floated in the market.
Some Of The Indices Used In Categorizing Large Cap Companies
By: Peter Gitundu