Market Capitalization refers to the total ‘market-size’ of a company, calculated by the number of shares outstanding multiplied by the stock price.

Investors should take care not to consider a company’s market capitalization as an accurate reflection of the company’s actual size by assets. Companies with very large market capitalizations can still operate with net losses, Twitter being an example.

There are generally four categories of market capitalization: mega cap, large cap, mid cap, and small cap. Mega caps are generally thought of as ‘boring’ stocks, generally with lower risk profiles and lower return potential. Small caps generally fall on the other end of the spectrum, with higher risk and higher reward profiles.

What is a Price-Weighted Index?
What is Weighted Average Market Capitalization?