What are small cap stocks?

Question

What are small cap stocks?

Answer 1

The rapid growth of mutual funds spurred Wall Street to categorize stocks according to their market cap, which is determined by multiplying the company's number of outstanding shares by its current market price. Small-cap stocks generally fall between $200 million and $1 billion. Many small-cap companies are emerging and have a lot of potential, making them a good investment opportunity if you research their sales and earnings (both of which should be increasing).

Micro-cap stocks have under $200 million market capitalization. The majority of companies fall in this group, but only a small amount of analysts follow these companies. Still, these companies have tremendous potential and are a cheaper buy. Most shortsighted investors ignore these stocks – but they are ideal for a patient investor, willing to put in some time.  If you're not sure about how to research this, Yahoo finance and beaconequity.com are great research tools.

Answer 2

Refers to stocks with a relatively small market capitalization. The definition of small cap can vary among brokerages, but generally it is a company with a market capitalization of between $300 million and $2 billion.