what is mid cap 
mid cap or mid capitalization is the term that is used to designate companies with a market cap capitalization or market value between 2 and 10 billion as the name implies a mid cap company falls in the middle between large cap or big cap and small cap companies classifications such as large cap mid cap and small cap are approximations of a company s current value as such they may change over time understanding mid capthere are two main ways a company can raise capital when it s needed through debt or equity debt must be paid back but can generally be borrowed at a lower rate than equity due to tax advantages equity may cost more but it does not need to be paid back in times of crisis as a result companies strive to strike a balance between debt and equity this balance is referred to as a firm s capital structure capital structure especially equity capital structure can tell investors a lot about the growth prospects for a company one way to gain insight about a company s capital structure and market depth is by calculating its market capitalization companies with low market capitalization also referred to as small caps have 2 billion or less in market capitalization large capitalization firms have over 10 billion in market capitalization and mid cap firms fall somewhere in between these two categories ranging from 2 billion to 10 billion in market capitalization additional categories such as mega cap over 200 billion micro cap 50 million to 500 million and nano cap less than 50 million have been added to the spectrum of market capitalization for the sake of clarity for investors a mid cap company may be appealing because they are expected to grow and increase in profits market share and productivity they are in the middle of their growth curve since they are still considered to be in a growth stage they are deemed to be less risky than small caps but more risky than large caps successful mid cap companies run the risk of seeing their market capitalization rise mainly due to an increase in their share prices to the point where they fall out of the mid cap category while a company s market cap depends on market price a company with a stock priced above 10 is not necessarily a mid cap stock to calculate market capitalization analysts multiply the current market price by the current number of shares outstanding for example if company a has 10 billion shares outstanding at a price of 1 it has a market capitalization of 10 billion if company b has one billion shares outstanding at a price of 5 company b has a market capitalization of 5 billion even though company a has a lower stock price it has a higher market capitalization than company b company b may have the higher stock price but it has one tenth of the shares outstanding advantages of mid capsmost financial advisors suggest that the key to minimizing risk is a well diversified portfolio investors should have a mix of small mid and large cap stocks however some investors see mid cap stocks as a way to diversify risk as well small cap stocks offer the most growth potential but that growth comes with the most risk large cap stocks offer the most stability but they offer lower growth prospects mid cap stocks represent a hybrid of the two providing a balance of growth and stability no one can accurately predict when the market will favor a specific kind of company whether it s a large mid or small cap so it s important to diversify your portfolio as we mentioned above but the percentage of mid caps that you ll want to invest in depends on your specific goals and risk tolerance however there are many advantages to mid cap companies that investors may want to consider when interest rates are low and capital is cheap corporate growth is generally stable mid cap companies typically can get the credit they need in order to grow and they do well during the expansion part of the business cycle mid caps are not as risky as small cap companies which means they tend to do relatively well financially during times of economic turbulence in addition many mid caps are well known are often focused on one specific business and have been around long enough to make a niche in their target market and finally because they are riskier than large caps they may have a higher return which could be more appealing to a less risk averse investor s bottom line investor s can either buy a mid cap company s stock directly or buy a mid cap mutual fund an investment vehicle that focuses on mid cap companies 