The next level up from penny stocks are “small cap stocks”. Small cap stocks are the stocks of a company that is typically worth between $300 million USD and $2 billion USD. These companies are still much smaller than the large companies that you can recall off the top of your head.
These companies also tend to be more volatile in price because of the uncertainty that they may have in their cash flows and other public opinions.
The stock price itself does not tell you whether or not a stock is considered small cap, but the equation to verify a company’s capitalization is:
Market Cap = Price per Share * # Shares Outstanding
If that number is between $300 million and $2 billion then the company is considered a small cap.
After small cap stocks, there are mid cap stocks that are of companies valued between $2 billion and $10 billion. These stocks are usually less volatile and more liquid than small cap stocks, however, still provide more volatility than large cap stocks.
Large cap stocks on the other hand are stocks of companies that have a value of greater than $10 billion dollars. These are the stocks of the well known companies that have been around for a long time. Brands such as Microsoft, Apple, Coca Cola, and Johnson & Johnson are all great examples of large cap stocks.
Large cap companies tend to be very transparent in their financials. They want to be seen as trustworthy to their investors. These companies don’t tend to have many traders because the true value is easier to determine than newer companies. Large cap companies are stable, and tend to pay regular dividends.
If you want to learn more about getting started investing/trading in the stock market, I recommend you read this article:
and here’s the book that led me to begin investing in the stock market in the first place. I highly recommend!
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Have a great day!