Market Capitalization: Stock Size Matters
Stocks within many indexes are weighted by market cap.
© Kamonrat Meunklad—EyeEm/Getty Images
A company’s market capitalization—or total outstanding share value—might not seem important when you buy the smartphone, cereal, or car the company manufactures. But when you buy shares, “market cap” isn’t just a ranking system for stocks. It’s like having a playbook that tells you how a stock might behave.
An ocean freighter loaded with heavy cargo doesn’t zip through the waves like a speedboat on your local lake. Stocks also behave differently based on size. Traditionally, the biggest behemoths on Wall Street often cruise along more slowly and steadily, while the smallest companies are primed for speed and maneuverability….
