Most investors already hold some large-cap stocks. These are stocks from companies with large market capitalizations and denote a high market value. Large-cap stocks got their name because they’re larger than small-cap and mid-cap stocks.

What’s a large-cap stock?

A large-cap stock is a publicly traded firm’s stock whose value exceeds $10 billion. Sometimes called big-cap stocks, these are considered the stalwarts or blue chips of the stock market. For example, think of companies such as Walt Disney​ (NYSE:DIS)Coca-Cola (NYSE:KO), and General Motors (NYSE:GM). These firms are established giants with leading positions in their industries.

For example, Amazon (NASDAQ:AMZN) and JPMorgan Chase (NYSE:JPM) are two of the largest large-cap firms with market caps of more than $200 billion. As a result, the market considers them a distinct sort of stock known as mega-caps, although they’re simply “jumbo” large-caps for most objectives.

Investors generally consider smaller, faster-growing firms to be more appealing by investors, but large-cap equities may be very lucrative for those who study them thoroughly. Because these vast corporations are less volatile than their little siblings, they can also help in diversifying a portfolio of smaller stocks while still providing good share price appreciation over time. The main reason people choose to invest in large-cap stocks is that they are generally a safer investment. They also have more reliable profit streams than smaller companies. Another advantage is that during a bear market, large-caps will outperform small-caps.

Large-cap growth stocks

Some examples of large-cap growth stocks are Facebook parent Meta Platforms (NASDAQ:FB) and chipmaker Nvidia (NASDAQ:NVDA). While there is no set definition, a growth stock is typically any company seeing a 20% rise in revenue.

However, large-cap growth stocks are the exception. They’re usually big companies with moderate growth prospects. If you want an investment with higher potential, look into smaller firms in the lower market cap range.

Why large-caps?

Large-cap companies usually have an established history and provide regular dividends. They may not all be familiar names, but many people would still recognize them. These large-cap blue chips tend to be dependable businesses with good management teams that are financially stable and have long histories of profitable outcomes. Others might experience more ups and downs due to their cyclical business cycles – meaning their profits & stock prices ebb & flow along with the economy as a whole. Finally, some large corporations were once smaller companies that rapidly grew over time.

Over the past decade, large-cap stocks have not only outperformed their smaller counterparts but have done so with less volatility. For example, when the COVID-19 pandemic hit in March 2020, the S&P 500 experienced significantly less decline than the Russell 2000.

How to evaluate top large-cap stocks

Large-cap equities come in a variety of shapes and sizes. Some, such as MercadoLibre (NASDAQ:MELI), are former small-cap growth stocks that have continued to grow; others, such as Starbucks (NASDAQ:SBUX), are long-standing players in difficult-to-enter industries; and still others, such as Walmart (NYSE:WMT), are big corporations with historic track records of solid management and steady development.

Almost every top large-cap business has identifiable competitive advantages, a solid brand, proven leadership, and a history of rewarding investors through dividends, share repurchases, or long-term share price growth.

Reasons to invest in large-cap stocks

Large-cap stocks may be a good option if you can keep an investment for more than five years, and it is suitable for your portfolio. If your portfolio is primarily composed of high-risk growth equities, adding a few safe large caps to diversify your assets without jeopardizing growth potential might be wise.

Remember that, while large-cap stocks are often those of firms that “everyone knows,” doing your research before purchasing is crucial. You can also add a large-cap-focused ETF or mutual fund to your portfolio.

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