Definition
Mid-Cap, or mid-capitalization, refers to publicly traded companies that have a market capitalization between $1 billion and $5 billion. Market capitalization is calculated by multiplying the company’s current stock price by its total number of outstanding shares. Mid-cap companies are generally considered more stable than small-cap companies and offer greater growth potential than large-cap companies.
Examples
- Etsy, Inc.
- Market Cap: Approximately $1.5 billion
- Sector: E-commerce
- Under Armour, Inc.
- Market Cap: Around $2.3 billion
- Sector: Consumer Goods
- Zillow Group, Inc.
- Market Cap: About $4.8 billion
- Sector: Real Estate Technology
Frequently Asked Questions
What’s the difference between mid-cap, small-cap, and large-cap stocks?
Small-cap stocks have market capitalizations under $1 billion, large-cap stocks have market capitalizations over $10 billion, and mid-cap stocks fall in between, typically ranging from $1 billion to $5 billion. Small-cap stocks are less stable but offer higher growth potential, while large-cap stocks are more stable but have slower growth potential.
Why should investors consider mid-cap stocks?
Mid-cap stocks provide a balanced investment option, offering both growth potential and relatively lower risk compared to small-cap stocks. They often have more established business operations and are in a better position for growth compared to large-cap stocks.
What are the risks associated with mid-cap stocks?
Mid-cap stocks can be more volatile than large-cap stocks because they are still growing and may not have the established market presence. They also face competition from more prominent companies and may have less diversified revenue streams.
Are there mutual funds specifically for mid-cap stocks?
Yes, many mutual funds and exchange-traded funds (ETFs) focus on mid-cap stocks, and they often include ‘Mid-cap’ in their names. These funds enable investors to gain diversified exposure to mid-cap companies.
Related Terms
- Market Capitalization (Market Cap): The total market value of a company’s outstanding shares of stock.
- Small-Cap: Refers to companies with a market capitalization under $1 billion, which are often considered high-risk but offer high growth potential.
- Large-Cap: Refers to companies with a market capitalization over $10 billion, typically more stable and established.
- Mutual Fund: An investment vehicle that pools money from many investors to invest in securities such as stocks, bonds, and other assets.
- Exchange-Traded Fund (ETF): A type of investment fund traded on stock exchanges, much like stocks. ETFs hold assets such as stocks, commodities, or bonds and generally track an index.
Online References
Suggested Books
- “The Intelligent Investor” by Benjamin Graham
- “Common Stocks and Uncommon Profits” by Philip Fisher
- “A Random Walk Down Wall Street” by Burton G. Malkiel
Fundamentals of Mid-Cap Stocks: Investing Basics Quiz
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