The size of the company matters while purchasing stocks

The stock marketis certainly not a gamble place and certainly not you are like your superstore where you get the exact price of each commodity. The stock market is a vast ocean of stocks and you should learn about stocks, funds, buying and selling of stocks thoroughly before taking a plunge into this vast ocean. You can succeed only if you do proper research and learn the tricks of the trade in the stock market. This will come through experience and learning.

While investing in stocks, you should make a not of the company size, as size does matter. Some investors are very choosy and stick to companies of a particular size while some risk takers spread their stock portfolio among companies of various sizes. Small as well as large companies react differently to the stock market so while picking up a stock you should bear this in mind.

But the question is how will you determine the size of the company? Simple, there are two ways, revenue and market capitalization which will help you gauge the size of a particular company. Market capitalization is a better way to determine the size of a company than revenue method because differences in company policies make it very difficult to compare revenues.

Market capitalization is the standard method or standard procedure used to measure the size of a company. Market capitalization is determined by multiplying the outstanding shares with the current stock price. If you compute the market capitalization of two firms then it is very easy to make a comparison of two companies.

The simplest and easiest way to determine the market cap without having to struggle with calculations is to get into sites like yahoo finance or Google finance and just request the market cap quote for any company stock. You will get it in seconds. Investors then categorize the stock based on its size.

Investors place companies in the following segments according to their market capitalization
Mega cap- $ 100 billion and above
Large cap- $(8-100) billion
Mid cap-$( 1-8) billion
Small cap-$ 1 billion and under
Micro cap-$300 million and lower

Although this is not the standard prescribed size, it is accepted worldwide by most investors and analysts. The stock market usually uses the small, mid and large rankings to size a company. The survival of a company does not depend upon its size but you will get a fair idea of the company’s market capitalization and can judge the company better.