A large cap is a company with a relatively large market capitalization, generally between about $5 billion and $200 billion.
These are the main workhorses of companies. Just about any company that the person on the street could name would fall into this category. These are the Intels, Yahoo!s, and Johnson & Johnsons of the world. They could be relatively young (like Yahoo!) or over a century old (like Johnson & Johnson).
As such, these companies are generally highly followed by Wall Street analysts and many investors. Therefore, it is unlikely that the individual investor will find a piece of information that the market as a whole doesn't know. That doesn't mean, however, that investing in these companies is not worthwhile. Many pay dividends and many continue to grow, either organically or through acquisitions. After all, where else do mega cap companies come from? As part of a well-diversified portfolio, some of your investments should include large caps to (hopefully) add some stability, counteracting the greater volatility usually found in smaller companies. Of course, this can be achieved by investing in an S&P 500 index fund.
The S&P 500 index requires that a company have a market cap of at least $3 billion in order to be listed. Therefore, all U.S. large cap companies are found on this index, along with the handful of mega caps.
Recent Mentions on Fool.com
- The 401(k) Crisis and What You Can Do About It
- 1 Big Pharma Stock to Watch in 2016
- Can You Guess Which Surprising Company Is Trying to Become a Cardiovascular Drug Giant?
- 3 Reasons Why Netflix Under $100 Is a Deal
- The Great Retirement Plan Every Federal Employee Should Use
- $24.7 Billion Says Gilead Is Up to Something