Oct 07, 2019  | Tags: Investment

Our Insights

Market capitalisation is the total value of all the outstanding shares a company has. So will the bigger cap companies deliver bang for buck over the smaller companies? 

Let's weigh it up. 

Comparing Large Cap and Small Cap Companies

On the surface, successful large-cap companies may look like a smarter investment:

- They’re more stable than smaller companies
- There’s more research on and analysis of those larger companies
- It’s easy to offload shares of a large cap company when it comes time to sell

All of these factors are, in fact, proof that you should have some large cap shares in your portfolio.

But the investing story doesn’t end here.

Small cap companies have some significant benefits, as well.

3 Reasons to Invest in Small Cap Companies

1. Successful small cap companies may fly below the radar.

There’s a lot of income potential locked up in those small cap companies that don't get as much expert coverage as the larger corporations. You don’t have to invest strictly in the big names everyone is talking about. With a little independent research, you could find some well-performing smaller companies to cash in on.

2. Small cap companies have greater potential for growth.

Because the company shares of small cap companies start out at a lower value and because the companies themselves are often new to the market, there’s room for explosive growth. You can see your investment skyrocket in a very short amount of time.

3. Small cap company stocks often outperform large cap company shares.

Yes, there is an inherent risk associated with investing in small cap companies. But it’s a risk that can pay off big. If the company does well, the investors are rewarded well for taking on the added risk. This isn’t a bonus you can expect from investing in a large cap company.

Get Advice

Either way, when it comes to building out your investment strategy, you need expert advice. Talk to the team at Calder Wealth Management. Call us on (08) 8373 3333 to schedule your free initial appointment. 

Written by Ben Calder at Calder Wealth Management.