Equity Investing Strategies

Large-cap refers to stocks with a market capitalization over $10 billion. In order for a company to obtain large-cap status, they typically need to be one of the leaders within their industry or sector. Although they can be prized for stability, large-cap stocks are not necessarily synonymous with growth potential. The reduced volatility and sometimes high dividends can make them particularly appealing to certain types of investors. 

Companies with a market capitalization under $2 billion are often categorized as small-cap, while those with a market capitalization of between $2 billion and $10 billion are considered mid-cap stocks. Small-cap and mid-cap stocks may have higher growth potential as well as increased risk and volatility compared to large-cap stocks, but they may be valuable for investors willing to tolerate more risk for a greater chance at capital appreciation.

These are stocks for foreign companies. Companies in developed markets, like Europe or Japan, might be categorized differently than companies operating in emerging markets, like India or China. International stocks may be recommended for added diversification and to get exposure to differing economic growth drivers, like unmet consumer needs in foreign markets that have already been met in domestic markets. Global economic factors often play a role in international stock investment decisions, especially as they pertain to an investor’s risk preferences.   

The sectors that investment experts are most optimistic about change on a year-to-year basis, with the strength of individual sectors fluctuating based on things like consumer demand, overall economic health, technological advancements, changes in life expectancy, the rate of infrastructure development and countless other factors. The sector-specific recommendations of an investment manager could vary depending on current growth potential or risk mitigation value in the context of the current economic cycle.

These are stocks that exhibit higher growth or growth potential than their peers within their sector, geographic or market capitalization grouping. What qualifies as a growth stock can change rapidly depending on the governance of the business, as well as market, consumer or sector-specific demands. A potential downside of growth stocks is these companies often reinvest earnings to enable continued growth, meaning they’re less likely to pay dividends. They may be a better option for investors seeking capital appreciation rather than income generation. 

A dividend is a payment of profit to shareholders. A specific amount is paid out per share based on the share type and can lead to significant income generation depending on the size of the investor’s portfolio and ownership interest in the company. The largest and most consistent dividends are often paid by more mature companies in stable industries, meaning they are less likely to lead to large capital appreciation but can be great for older investors seeking regular income in retirement.