Large Cap vs Small Cap Stocks

Difference Between Large Cap vs Small Cap Stocks

7 min read

Stocks are put into different categories based on their market capitalization. It’s calculated by multiplying the outstanding shares by the stock price. Categories range from nano-cap, the smallest companies, to mega-cap, which are much larger companies. In today’s market, investors can profit even when investing in smaller-cap stocks. Which stocks have performed the best over time? Large cap vs small cap? Let’s find out!

  • Nano-cap: Under $50M
  • Micro-cap: $50-$300M
  • Small-cap: $300M-$2B
  • Mid-cap: $2-$10B
  • Big-cap: Over $10B
  • Mega-cap: Over $200B

Large-cap vs. small-cap values above have changed over time due to the growth of stocks. A big-cap stock in the ’80s is considered a small-cap stock today.

It’s important to note that these values are not fixed and will change over time. The majority of companies fit in the small to mid-cap range.

Smaller stocks have the potential to grow and fall at a much faster pace than larger ones. In fact, with increased volatility comes more risk.

They’re not necessarily at the start-up phase of the business. Most small-cap stocks have long been in business, and their brand is well recognized. 

Take AMC Entertainment Holdings Inc (NYSE: AMC) as an example. They are a multinational movie theater chain that has been around for decades.

Due to the pandemic, the business has been slow to recover. Their market cap is under $10B and has been a roller-coaster over the last few years. Less than two years ago, they were considered a small-cap stock.

However, six months ago, they were a big-cap stock. This demonstrates that certain markets are more vulnerable in today’s economy than others. Investors can be bullish one day and extremely bearish the next.

Larger-cap stocks may grow slower, but they tend to be more stable. They are also likelier to pay dividends. Smaller-cap stocks usually earn fewer profits and aren’t able to pay their shareholders quarterly. It’s more reasonable to keep the funds to expand the business and please the shareholders in the future.

Large Cap vs Small Cap Stocks

Blue Chip Stocks

Blue-chip stocks are known to be historically solid multinational companies from different industries. They’ve had consistently strong earnings, financials, and leadership. Often, they pay dividends. Today, reliable blue-chip stocks include the following:

  • Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT)
  • Berkshire Hathaway (NYSE: BRKA or BRKB) 
  • Coca-Cola (NYSE: KO) 
  • Visa (NYSE: V) and MasterCard (NYSE: MA)
  • Lockheed Martin (NYSE: LMT)     
  • Walmart (NYSE: WMT)

We can’t put a blanket over all big-cap stocks. They are not bulletproof and can fall. Meta Platforms Inc (NASDAQ: FB) recently recorded the biggest single-day loss in market history. FB is a mega-cap stock that lost over $200B in one day on Friday, February 4th. That was a 25% decline. This loss was almost 40% over the last six months. 

Another unforgettable example is Enron. The ex-energy giant filed for bankruptcy in December 2001 for over $60B. The company’s management used fraudulent accounting to hide losses and increase revenues. After the fraud was uncovered, their stock plunged from $90 to $0.26. In the following months, fingers were pointed, but ultimately, the shareholders were the ones who suffered.

What’s the lesson so far? Do your due diligence—large cap vs small cap. No matter how big, every company out there can fraud the system. There’s always a smaller company in the same industry that can achieve great things in the future.

Stock Market Indexes Stock Market Sectors List List of Stock Symbols
DESCRIPTION Stock indexes list that includes S&P 500, Dow Jones, Nasdaq 100, Russell 2000 and foreign indices
11 sectors, IT, healthcare, energy, real estate, financial, materials, utilities, industrials, consumers, communications
Stock symbols list that includes company name and ticker symbol. Non-listed companies are included


Large-cap stocks tend to be part of more indexes and funds than their smaller counterparts.

Multinational corporations tend to fall under more than one market. Let’s take Amazon as an example.

This mega-cap can fall under software, entertainment, e-commerce, and many other categories.

Hence, it is much more popular and fits in many indexes. Small-cap stocks are part of indexes and funds, where they are often grouped.

Additionally, they are not as popular or stable.

Big investors tend to switch their holdings depending on market conditions. 

Let’s look at how stocks from large-cap vs small-cap categories have performed during uncertain times.


During the first five months of 2021, small-cap stocks did much better than their larger counterparts. However, larger-cap stocks came out on top by the end of the year. What was the reason behind this reversal? 

At the start of 2021, there seemed to be less risk worldwide. Vaccines became more available, interest rates were low, and the world seemed to come back to life. This was a good recipe for smaller companies to make a comeback. Investors flooded their funds with riskier assets.

As the year progressed, uncertainty increased. Chinese firm Evergrande was on the verge of defaulting. COVID’s long-term effects started to show. Inflation began rising. Supply-chain operations were disrupted.

Finally, the highly contagious Omicron variant spread fear worldwide. Bigger companies tend to fare better during a more difficult economic period. Investors abandoned riskier investments and moved their money to relatively safe stocks. In other words, money moved from small-cap stocks to large-cap stocks.

During the last two years, when markets were deemed low-risk, investors shifted their funds to small-cap stocks with high growth potential. When markets were riskier, investors transferred their funds to fixed-income and Large-cap stocks.

2000-2002 & 2008-2009

After the Dotcom Bubble (2000-2002)  and the Global Financial Crisis (2008-2009), small-cap stocks outperformed large-cap stocks by 42% and 32% in the following three years, respectively.

We are not exactly in a recession, but small-cap stocks did take a hit recently. Are past recoveries a glimpse into the following months? Restrictions are fading again, and the next months may be bullish.

We still have unresolved questions about a war with Russia, inflation, and supply-chain operations, but major investors may overlook these fears when looking at large-cap vs. small-capp stocks.

Final Thoughts: Large Cap vs Small Cap

It’s always hard to predict the stock market’s course, but certain indicators lend us a hand. Worldwide markets will bounce back once various issues sort themselves out. It may be wise to diversify our portfolios between large-and small-cap stocks to avoid unpleasant surprises.

Smaller companies have a huge potential to grow in the upcoming months. How much bigger can Amazon, Google, Microsoft, Apple, and others get?

Large-cap stocks will often pay investors dividends and grow steadily. Small-cap stocks will take investors for a ride and are much less predictable over the long term. High risk leads to high rewards. The important thing is to remain informed about worldwide market conditions.

If you want to learn more about how to profit from the stock market, head over to our free library of educational courses. We have something for everyone, including trading options for those with small accounts.

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