Investing in the stock market can be daunting if you are a beginner. Whether you want to grow your savings or earn passive income, chances are, you are looking to make better use of your hard earned money. But successful long-term investing doesn’t have to be so complicated. In fact, there are a few simple strategies you can use to invest your money safely and reliably.
When creating an investment strategy, one way to build a balanced portfolio is to include a mixture of stocks with different market caps. Market cap, or market capitalization, refers to a company’s value based on the total number of outstanding shares. It is calculated by multiplying the current stock price by the total number of outstanding shares. For example, a company with 5 million shares selling at $10 a share would have a market cap of $50 million.
Size and value are two critical factors investors look for when creating an investment strategy. With market cap, investors can quickly judge the company’s size and compare it to other competitors. In addition, they can reflect how valuable the public perceives the company to be, which is important when considering the stock’s future prospects.
Types of Market Caps
Market caps are broken down in three sizes: small, mid, and large.
- Large Cap: large cap stocks represent the majority of the U.S. equity market. They can be found in leading benchmark indices like the S&P500, the Nasdaq Composite, and the Dow Jones Industrial Average. The market cap ranges between $5 billion to $25 billion.
- Mid Cap: mid cap companies have a market capitalization between $2 billion to $10 billion. A mid cap stock usually combines the growth potential of small cap stocks along with the stability of established large cap stocks.
- Small Cap: small cap stocks have a market cap that ranges from $300 million to $2 billion. As small cap companies tend to be smaller in size and value, their stocks tend to be risker and more volatile. One potential advantage, however, is their growth opportunities. Just imagine having invested in Amazon in 1998 when the stock was just $7 dollars.
Characteristics of Large Cap Stocks
Incorporating large cap companies may be the perfect avenue for risk-averse investors. When compared to mid cap or small cap stocks, large cap stocks generally have access to more capital, longer operational history, and better liquidity.
There are several potential benefits to implementing large cap stocks into your portfolio.
- Transparency: Large cap companies are known to be well-established. They have a long track record of successful business expansions and operations, which also means that important details like their financial statements and profits are easily available for the public. Due to this transparency, investors and analysts can quickly determine if a company is worth the investment.
- Dividend Payouts: Since large cap companies are already established in the market, they typically do not experience high growth rates. Rather, they provide gradual capital appreciation and in turn, compensate shareholders in the form of dividends. For investors looking for long-term growth, investing with dividends in mind can be a great way to stay in the market.
- Stability: Perhaps the biggest potential advantage to investing in large cap stocks is the stability. Large cap companies are usually the ones that can weather economic downturns. They likely have a higher probability of staying in the market even when other companies are filing bankruptcy during difficult ties.
- High Liquidity: Since well-established companies tend to have more buyers in the market, their stocks are easier and simpler to sell. And investors will likely have less issues unraveling their portfolios.
- Capital Appreciation: Most large cap companies are known for their high performance and stable earnings over a long period of time — meaning, their stock prices don’t fluctuate much. And even if they have, their prices have tended to bounce back up once markets recover. This has allowed large cap companies to offer better capital appreciation to investors over the years.
Blue-Chip Stocks
One great thing about investing in large cap stocks is getting your hands on blue-chip stocks. Blue-chip stocks refer to high-quality companies that are likely considered leaders in their respective sectors. These companies are well-established and known to be financially stable. All blue-chip stocks are large cap stocks, but not all large cap stocks are considered blue chip stocks. The term “blue-chip” comes from a poker game, where a blue chip holds the largest value.
Some people may feel that investing in blue-chip stocks is rather boring and ineffective since their stock prices tend to stay unmoved for the short term. However, many would also agree that blue-chip stocks could offset risks associated with your portfolio and provide a healthy long-term outlook in terms of capital gains. While blue-chip stocks are not immune to losses and historic performances do not guarantee future results, their stability has become an extremely valuable commodity among today’s investors.
Featuring Qraft AI-Enhanced U.S. Large Cap ETF (NYSE: QRFT)
Qraft AI-Enhanced U.S. Large Cap ETF (NYSE: QRFT) is an actively managed portfolio of U.S. large cap stocks, handpicked directly by AI technology. Knowing the importance of integrating large cap stocks into your portfolio, Qraft Technologies, Inc. has developed an AI-driven ETF that focuses primarily on U.S. large cap companies. QRFT was listed on the New York Stock Exchange on 05/21/19. Since inception until 12/31/20, QRFT has outperformed its benchmark S&P 500 Index.
QRFT is available to purchase on various brokerage accounts, including Fidelity, Charles Schwab, TD Ameritrade, E-Trade, Robinhood, and more. Please note that you cannot invest in QRFT directly through Qraft Technologies, Inc.
Bottom Line
There are plenty of reasons to like large cap stocks. We believe they can play a critical part in your overall investment strategy. But if there’s one thing to note, it’s always important to diversify your portfolios so you don’t completely rely on one sector or markets.
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Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call 1–855–973–7880 or visit our website at www.qraftaietf.com. Read the prospectus or summary prospectus carefully before investing.
The Funds are distributed by Foreside Fund Services, LLC
Investing involves risk, including loss or principal. The Qraft Funds are subject to numerous risks including but not limited to: Equity Risk, Sector Risk, Large Cap Risk, Management Risk, and Trading Risk. The Funds rely heavily on a proprietary artificial intelligence selection model as well as data and information supplied by third parties that are utilized by such model. To the extent the model does not perform as designed or as intended, the Fund’s strategy may not be successfully implemented and the Funds may lose value. Additionally, the funds are non-diversified, which means that they may invest more of their assets in the securities of a single issuer or a smaller number of issuers than if they were a diversified fund. As a result, each Fund may be more exposed to the risks associated with and developments affecting an individual issuer or a smaller number of issuers than a fund that invests more widely. A new or smaller fund’s performance may not represent how the fund is expected to or may perform in the long term if and when it becomes larger and has fully implemented its investment strategies. Read the prospectus for additional details regarding risks.
QRAFT AI-Enhanced U.S. Large Cap ETF: Companies in the health care sector are subject to extensive government regulation and their profitability can be significantly affected by restrictions on government reimbursement for medical expenses, rising costs of medical products and services, pricing pressure (including price discounting), limited product lines and an increased emphasis on the delivery of health care through outpatient services.