What are small-cap stocks?
Small-cap stocks refer to the stocks of small companies that are publicly traded on the stock exchange.
In other words, the market capitalization of small-cap stocks is less than Rs 5,000 crore on the stock exchange. Small-cap stocks are generally highly volatile in nature as they are likely to be traded less. It means that the price of small-cap stocks fluctuates more, owing to the varying supply and demand.
Trading in small-cap stocks
Investors with very high-risk tolerance can invest in small-cap stocks. They can manage the risks associated with small-cap stocks through research, proper asset allocation, &portfolio balancing.
Moreover, there is less information available about small-cap companies while there is a vast range of information available on large cap and Mid cap stocks.
Trading in mid-cap stocks
The companies which have a market capitalization above Rs 5,000 crore but less than Rs 20,000 crore are referred to as mid-cap companies. Unlike small-cap companies, companies with these stocks provide adequate information on their financial health and history. This helps the investor to effectively conclude on the stock’s growth potential and profitability to make an informed decision.
Mid caps being positioned in the middle of Large and small caps, they have room for value appreciation and allow for substantial dividends too.
Trading in blue-chip stocks
Companies with a large market capitalization of Rs 20,000 crore or more are called blue-chip companies. Blue-chip companies facilitate corpus building and investors can avail stable returns on investment. Moreover, being a long-term investment option, investors get plenty of time to build a huge corpus aligned with their financial goals.
Additionally, blue-chip companies have higher goodwill, credibility and creditworthiness as compared to small-cap stocks. Blue-chip stock companies are well-established companies that come with an attractive investment option for investors and extend attractive dividend payouts also. Blue-chip companies are generally considered safe investment options for most investors.
If your risk appetite is low, you can surely rely on large-cap companies, such companies are stable and dominate the industry. They hold themselves well in times of recession, economic crisis, or any other negative event.
You can also consider investing in mid-cap companies - Investing in these companies can be riskier than investing in large-cap market companies. LIC Housing Finance and Castrol India are some examples of mid-cap companies that are listed on the stock exchanges of India.
All three categories have their positives, however, which one would be the best for you to invest in absolutely depends on your risk appetite and financial goals. You can always diversify your portfolio across Large, Mid, and small cap to make the most of the market movements. At any stage of your investment journey, it is always advised to seek professional assistance before making any investment so that you can reap profits and generate benefits from your investment. Get in touch with mastertrust’s convenient and instant online trading platform that is safe, secure and bundled with charting options, real-time quotes, portfolio tracking, news feed and research options.
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