juggling the market cap

6
What? When? How? Market Capitalization #Simply Speaking Lesson 7

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What? When? How?

Market Capitalization

#Simply Speaking Lesson 7

“Market capitalization, or market cap, is the aggregate value of the stock of any listed company.

Market capitalization is the market value of a company's outstanding shares.”

Market Cap = (Current Market Price Per Share) X (TotalShares Outstanding)

For e.g.Current Market Price = Rs. 500 per shareTotal Shares = 1,00,000Market Cap = 500 X 1,00,000 = Rs. 50 million (Rs. 500 Lakh)

Large Cap

Market Cap above

Rs. 10,000 Cr

For e.g. TCS, Reliance Ind, ITC

Ltd.

Mid Cap

Market Cap from Rs. 500 Cr to Rs.10,000 Cr

For e.g. Voltas Ltd., Bank of Maharashtra

Small Cap

Market Cap below Rs.500 Cr

For e.g Mercator Ltd., EssarShipping

Higher the Stock Price – Larger the Market Cap

For e.g.

Company A, Share Price = Rs. 50

Total Shares in Market = 100,000

Market Cap = Rs. 50 Lakh

Company B, Share Price = Rs. 500

Total Shares in Market = 1000

Market Cap = Rs. 5 Lakh

Risk AppetiteLarge Cap companies experience slower growth hence lower the investment risk with a steady rate of return.

Mid & Small Caps experienced faster growth hence higher the returns, higher the investment risk (as compared to Large Caps)

Selecting the right Investment depends always on the Risk Appetite of the investor

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• A long term portfolio should have 60-70% allocation to Large Cap Funds and 10-15% should be in Small & Mid Cap Funds put together.

•For people with a higher risk appetite looking to earn high returns, Small Cap Funds are the best option

•For people looking to strike a balance between Risk & Returns, Mid-Cap Funds are a very good option