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Differentiating Between Large-Cap Stocks and Small-Cap Stocks

Fritz Mowery

· Small-Cap Stocks
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Frederick Fritz Eugene Mowery is a Texas-based investment executive who owns and operates Mowery Capital Management, LLC. As president of Mowery Capital, Fritz Mowery leverages over 30 years of investment management experience to oversee an equity and fixed-income portfolio that mostly consists of large-cap stocks.

In the stock market, market capitalization is the metric used to separate business entities. Simply put, market capitalization, otherwise called market cap, is the overall value of a company's outstanding or publicly-traded shares. Based on this metric, business organizations fall into two categories: large-caps and small-caps.

Large-cap stocks, or big caps, are shares of business organizations with a market capitalization value of over $10 billion. Typically, these types of companies are large establishments, with Apple and Exxon Mobil being prime examples. They generally make up 90% of the equity market in the United States. Large-cap stocks are safer investments than small caps since they're more stable. However, they grow much slower than small-cap shares.
On the other hand, small-cap stocks have outstanding shares with an overall value of $300 million to $2 billion. They're generally companies still in the early stages of their development. As such, they carry more risk. Also, these organizations tend to struggle during economic recessions, as they do not have large corporations' financial muscle to sustain themselves. However, the value of their shares has more room to grow, with potentially higher returns.