Wednesday, 9 August 2017

Are large cap companies right for you?

Posted by Anonymous at 13:17 Labels:


It is of common knowledge that there are many different ways to approach investment. One of those is the conservative type, which goes for the secure assets that would provide with a rather constant profit, limiting risks of losing it all.
If that’s your prefered mode of operating, then companies with large capitalization might be your right choice. Commonly abbreviated as “large cap” or “big cap” companies, these refer to those giants out there with more than $10 billion on market capitalization.
Just to be clear, market capitalization is a result of multiplying the number of shares by its stock price per share. Depending on that number, we could also classify companies on a mid-cap and small-cap divisions, although the parameters do change overtime.
Here are some arguments to justify the addition of large-cap companies to your portfolio:
Large capital means less turbulence
You could easily compare it to planes. A small size plane is easily affected by air flows and changes on the weather, whether huge planes are more stable in such situations. The same principle applies to the stock market. If you are looking for a safe place to put your money, than large-cap stocks would provide with a better shelter for it.
Market leaders intend to stay on top
Once companies reach the status of large capitalization, we could bet they don’t want to go back down. Therefore, we could expect these companies to do whatever it takes to ensure that investors will continue to trust them with their money.
They are diversified internally
Let’s take an example: Alphabet - While the world’s largest search engine Google seems to be the most popular branch of Alphabet, the umbrella company has an extensive list of projects and units inside, from VR development, apps or even mobile phones.
More information, better decisions

Wall Street giant investment banks are covering large cap companies extensively, analysing each move they give and searching for better ways to take profits out of them. For such reason, you could count on a wider range of analysis available for the public, along with corporate reports that provide guidance for investors.

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