A reader left a comment asking how I define cap sizes.

Not sure that I have anything enlightening here;

Mega cap $100 billion and up (maybe this should be $150 billion)
Large cap $20 billion to $100 billion
Mid cap $2 billion to $20 billion
Small cap $500 million to $2 billion
Micro cap less that $500 million

I’m not sure if these are right because candidly I don’t look at cap size this way. I am more concerned about the average cap size of the entire portfolio. Earlier in the cycle I want the market cap of the portfolio to be smaller and for it to get larger as the cycle carries on and matures.

To get smaller in the portfolio obviously you would buy some smaller stocks but a portfolio that owns 50 stocks all greater than $50 billion (to pick an extreme example) will not be changed by adding one $250 million stock.

Even if all that is used are index funds I think the market cap size of the portfolio is something that should be managed just like yield and volatility.

Last 5 posts by Roger Nusbaum

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