As a personal finance enthusiast, you may have heard of the term “large-cap stocks” being thrown around in financial circles. But what exactly are large-cap stocks? And why should you consider investing in them?
Simply put, large-cap stocks refer to companies with a market capitalization of over $10 billion. Market capitalization is calculated by multiplying a company’s stock price by its outstanding shares. Large-cap companies tend to be well-established and financially stable businesses that have been around for many years.
When it comes to investing, large-cap stocks can provide investors with stability and predictable returns. These companies often have strong brand recognition and established customer bases which means they are less likely to go out of business or experience significant fluctuations in their stock prices.
In addition to stability, large-cap stocks can also offer investors dividends – regular payments made by companies to their shareholders as a way of sharing profits. Dividends can be an attractive feature for investors who are looking for steady income streams from their investments.
So, now that we understand what large-cap stocks are and why they might be beneficial investments let’s take a closer look at some examples of popular large-caps:
1) Apple (AAPL)
Apple is one of the most valuable publicly traded companies globally with a market cap exceeding $2 trillion as of October 2020. The tech giant has continued to grow its business through innovation in hardware products such as iPhones and iPads while expanding into new areas like streaming services via Apple TV+.
Investors who bought Apple stock five years ago would have seen their investment rise over 300%. While past performance doesn’t guarantee future results, Apple continues to demonstrate its ability to generate significant revenue growth year-over-year making it an attractive long-term investment option.
2) Amazon (AMZN)
Amazon is another popular example of a successful large-cap company whose value has grown rapidly since its inception in 1994. Its market cap currently stands at over $1.5 trillion.
Amazon’s business model centers around e-commerce, cloud computing, and digital streaming services. Over the past few years, the company has also made significant investments in areas such as healthcare and autonomous vehicles. These moves show that Amazon is continually looking for ways to innovate and stay ahead of its competition.
Investors who bought Amazon stock five years ago would have seen a return on investment of over 400%. While it may be challenging to predict future performance, Amazon’s continued growth puts it in a strong position for long-term investors.
3) Microsoft (MSFT)
Microsoft is one of the world’s largest software companies with a market cap exceeding $1.6 trillion as of October 2020. The company has been around since 1975, making it one of the oldest tech giants still operating today.
While Microsoft’s core business centers around software products like Windows and Office Suite, it has also expanded into other areas such as gaming through its Xbox platform and hardware devices like Surface tablets.
Investors who bought Microsoft stock five years ago would have seen their investment rise by over 250%, demonstrating that even older established companies can still offer significant returns to investors.
In conclusion, large-cap stocks are an attractive option for many investors due to their potential for stability and steady returns. While investing always carries risks, well-established large-cap companies have shown that they can weather economic downturns while continuing to generate revenue growth year-over-year.
If you’re interested in investing in large-cap stocks but aren’t sure where to start or how much risk you’re willing to take on your portfolio consult with a financial advisor who can help guide you towards investments that align with your goals. Remember – investing is not a one size fits all approach; each investor will need different strategies based on their individual circumstances.