Small Cap

Small Cap

What Does Small Cap Mean?

Stocks of companies that have a relatively small market capitalization; the criteria for small-cap stocks can vary among investors, but generally, stocks of companies with a market capitalization between $300 million and $2 billion are considered small cap.

Investopedia explains Small Cap

One advantage of investing in small-cap stocks is the opportunity to beat institutional investors. Because many mutual funds have restrictions that limit purchases of large portions of any one issuer's outstanding shares, some mutual funds would not be able to give a small cap a meaningful position in the fund. To overcome these limitations, the fund usually would have to file with the SEC; that would involve tipping its hand and potentially inflating the share price. One should keep in mind that classifications such as large cap and small cap are only approximations that change over time. Also, the exact definition can vary between brokerage houses.

Related Terms:
• Benchmark
• Growth Stock
• Large Cap—Big Cap
• Mid Cap
• Mutual Fund