Size Indices

Size indices refer to stock market indices that categorize companies based on their market capitalization, such as small-cap, mid-cap, and large-cap indices. These indices track the performance of companies within a certain size range, offering investors a way to compare the performance of different market segments. Common size indices include the S&P 500 (large-cap), the Russell 2000 (small-cap), and the S&P MidCap 400.

Example

An investor might track the Russell 2000 index to gauge the performance of small-cap stocks, which tend to have higher growth potential but greater volatility compared to large-cap stocks.

Key points

• Indices that classify companies by market capitalization.

• Includes large-cap, mid-cap, and small-cap indices.

• Provides insights into the performance of different market segments.

Quick Answers to Curious Questions

Why do investors use size indices to guide investment strategies?

Size indices help investors focus on specific market segments, such as small-cap or large-cap stocks, based on their risk tolerance and investment goals.

How do small-cap and large-cap indices differ in terms of risk and return?

Small-cap indices typically offer higher growth potential but come with more volatility, while large-cap indices are generally more stable with lower growth rates.