Key Asset Classes of Common Stocks

While there are many different asset classes for common stocks, five are the most used in investing.
Large capitalization (or large cap) stocks. These are companies with market capitalization (shares outstanding times price) of generally greater than $10 billion.
Mid capitalization (or mid cap) stocks. These are companies with market capitalization of between $2 billion and $10 billion.
Small capitalization (or small cap) stocks. These are companies with market capitalization of less than $2 billion.
International stocks. These are companies whose major listing and operations are outside the United States and which are considered “developed” by the World Bank and IMF. Generally, this would include Canada, France, Germany, Japan, Italy, and the United Kingdom.
Emerging Markets stocks. These are companies whose major listing and operations are from countries not considered developed by the World Bank and IMF

Classification of Common Stocks

There are a number of different classifications for stocks. You should recognize that these classifications are temporary and that they may differ from investor to investor and from one time period to another.

Blue-chip stocks: These are the stocks of the largest and best-managed companies. There is not a specific list of blue-chip stocks, and the stocks that are considered “blue chips” change from year to year. The phrase “blue chip” relates to poker, where the blue chips are the highest value of chip.

Growth stocks: These are the stocks of companies that are growing faster than average; these companies generally reinvest dividends. These companies also generally have higher price-earnings ratios and higher price-to-book ratios than the market as a whole.

Value stocks: Value stocks are less expensive, compared to the overall market. The companies that offer these stocks generally have lower price-earnings ratios and lower price-to-book ratios than the market as a whole.

Income stocks: These are the stocks of companies that pay dividends on a regular basis.

Cyclical stocks: These are the stocks of companies whose share prices move up and down parallel to the state of the economy.

Defensive stocks: These are the stocks of companies whose share prices move opposite to the state of the economy.

 

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