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Chapter 7. Equity Investments: Taking St... > How to Choose Your Equity Investment...

How to Choose Your Equity Investments

As I mentioned, you really can't have a long-term goal funded without the use of equities. Unfortunately, there are about as many theories on how to invest in equities as there are equities themselves. Most of the strategic discussions take place in Chapter 12 after we have considered all of the investment options available to you, but this chapter covers the basics of investing in equities. In other words, don't worry too much about how we will apply equities to meet your goals because we cover that later in the book. Focus here on learning about the equity markets and consider the manner in which you want to select your equity investments.

Large-Cap, Mid-Cap, Small-Cap, and Micro-Cap Stocks

In the equity market, stocks fall into a number of categories so that we can group them together and evaluate their performance. One such grouping, or class, is based on the market capitalization that we recently discussed and uses the terms large-cap, mid-cap, small-cap, and micro-cap to align companies according to their size. Table 7-2 provides the general capitalizations in these classes, although you'll find quite a bit of variance from one source to the next.


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