Market Capitalization: What Does It Mean?

Market capitalization, often called market cap, is the total market value of a company's outstanding shares of stock, calculated by multiplying the current share price by the total number of shares. It's used to classify companies into size categories: large-cap (generally over $10 billion), mid-cap ($2 billion to $10 billion), and small-cap (under $2 billion). Market cap gives investors a sense of a company's size, relative stability, and growth potential. Large-cap companies tend to be more established and stable, while small-cap companies often carry more risk but may offer higher growth potential. Many index funds and ETFs are built around market cap categories, making it a foundational concept for understanding how portfolios are structured.