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Investing in the stock market is profitable proposition for any investor. If done with little study and meticulous analysis of the stocks, stock market investment can give you huge return on your investment. But it is of no use if you do not keep track of the stock market on regular basis. Before you start investing in stocks there are a few things that you need to know. For example you must have a clear idea of the classification of the stocks that are done based on various criteria. Market capitalization of the company is one such metrics on which stocks are classified in a market.
Market capitalization is nothing but the value of the outstanding shares of a company in the stock market. The number is derived by multiplying the number of outstanding stocks of a company with the price of a share. Based on that, the stocks in a market are divided into four categories i.e. Large Cap, Mid Cap, Small Cap and Nano Cap stocks.
Large Cap Stocks – Stocks of the companies that has a market capitalization of more than $ 10 Billion is said to be Large Cap stocks. Generally stocks of large scale enterprises are listed in this category and stocks are highly priced in the market.
Mid Cap – Mid Cap stocks are stocks that are in middle of the Large Cap and the small cap stocks. Stocks of the companies with market capitalization between $2 Billion and $ 10 Billion are said to be Mid Cap stocks.
Small Cap – Stocks of the companies with market capitalization of less than $2 Billion is said to be Small Cap stocks.
Nano Cap – Nano Cap stocks are generally of those small public companies. Stocks of the companies with market capitalization of less than $ 50 million is said to be Nano Cap stocks.
Apart from this broad classification stocks are further classified into groups based on the industry in he which the company belong to. For example all the stocks of the steel manufacturing companies are grouped as steel stocks and all the pharmaceutical company stocks are grouped as pharma stocks and so on. This classification though is not technically done, it is beneficial for an investor who is interested to invest in a particular industry. In that case the investor can easily keep track of the industry and take buying and selling decisions if there is a general news on that particular industry.
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