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Best Large Cap Stocks To Buy In 2021

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The How and Why of Investing in Large Cap Stocks

Large-cap stocks are what many people refer to when they speak of a “flight to safety”. During periods of volatility even aggressive investors may shift their portfolio towards investments that offer stability and transparency. Those are the two primary benefits to large-cap stocks.

  • Although some analysts may disagree on what defines a large-cap stock, they are generally thought of to be the stocks of companies that have at least a $10 billion market capitalization. A distinguishing quality of large-cap stocks is they generally deliver quarterly profits and many return a portion of those profits to shareholders in the form of a dividend.
  • Many large-cap stocks fall into the category of blue-chip stocks. This gives them a beta of around 1. This means that during a bull market, large-cap stocks are not known for market-beating growth. However, all of the FAANG stocks are large-cap stocks so large-cap stocks are not without volatility.

For that reason, while large-cap stocks merit a position in any portfolio, the size of that position will depend on the age and investing style of individual investors. Younger investors and/or those investors with a high risk tolerance and growth as their primary goal may choose to have a larger position in mid-cap or small-cap companies.

Introduction into investing in large cap stocks

When you think about investing in large-cap stocks, the phrase bigger is better comes to mind. However in the case of a large-cap stock better is in the eye of the beholder. Many value-oriented investors enjoy the relative stability that comes from these quality stocks. However growth-oriented investors may find that large-cap stocks don’t provide enough capital growth for their investing style.

  • And there’s a reason for this. Large-cap stocks are generally mature companies with strong financials. These companies reliably turn a profit on a quarterly basis. And many of these companies return some of that profit to shareholders in the form of dividends. Dividends are a reliable source of income and can increase total shareholder return over time. However, they do serve as a brake of sorts on the overall growth of a company’s stock.

In this article, we’ll take a closer look at large-cap stocks. In addition to listing the characteristics that define large-cap stocks, we’ll also look at how large-cap stocks are similar to blue-chip stocks. This includes the fact that many large-cap companies pay regular dividends. And because no investment is without risk, we’ll take a look at a few disadvantages of large-cap stocks.

What is a large cap stock?

The generally accepted Wall Street rule is that a large-cap stock is that of a company or corporation with a market capitalization of over $10 billion. Market capitalization (i.e. market cap) is a measurement of a company’s total market value.

  • The formula for calculating market capitalization is to multiply a company’s stock price by the number of shares outstanding. This means that a company that has a stock price of $75 and has 2 million shares outstanding would have a market cap of $150 million ($75 x $1,000,000).
  • By this metric, over 90% of the equities on United States stock exchanges fall under this category. The Dow Jones Industrial Average and the S&P 500 are two market indices that follow large-cap stocks.
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What are the best large cap stocks at this moment?

Companies like Apple Inc. (AAPL), Microsoft Corporation (MSFT), Alphabet Inc. (GOOG), Johnson & Johnson (JNJ), GlaxoSmithKline plc (GSK), Baidu Inc.(BIDU), JD.com Inc. (JD), Amazon.com Inc. (AMZN), Netflix Inc (NFLX) and Zoom Video Communications Inc. (ZM) are very popular large cap stocks and are chosen often.

  1. Apple Inc. (AAPL)​
  2. Microsoft Corporation (MSFT)
  3. Alphabet Inc. (GOOG)
  4. Johnson & Johnson (JNJ)
  5. GlaxoSmithKline plc (GSK)
  6. Baidu, Inc. (BIDU)
  7. JD.com, Inc. (JD)
  8. Amazon.com, Inc. (AMZN)
  9. Netflix, Inc. (NFLX)
  10. Zoom Video Communications, Inc. (ZM)

1. Apple Inc. (AAPL)

Apple Inc. (AAPL) is a large cap stock that is often chosen by investors. It is in the technology sector and was founded in 1976. Some of its products include the iPhone, iPad, Mac, Apple Watch and iPod. The company has a market cap of almost $3 trillion and is headquartered in Cupertino, California.

Investing in Apple Inc. (AAPL) is very popular among investors due to the company’s large market cap and shares that are held by many different groups of people. The stock can be found on several brokerage firms, including Fidelity Investments, Charles Schwab Corp., T. Rowe Price Associates, Morgan Stanley and Wells Fargo Advisors LLC.

There are also ETNs like the iPath US Treasury Bond (NAR), which invests in US Treasury bonds, and the iPath Pure Beta Coffee (CAFE), which invests in coffee futures; these were designed for investors who want more options besides stocks or mutual funds. Because Apple Inc. (AAPL) has a highly diversified portfolio of products, it has not had any major setbacks since its

2. Microsoft Corporation (MSFT)

Microsoft Corporation (MSFT) is also a large cap stock that is often chosen by investors. It is in the technology sector and was founded in 1975. Some of its products include the Windows operating system, Microsoft Office, Xbox and Bing. The company has a market cap of over $1 trillion and is headquartered in Redmond, Washington.

Microsoft Corporation (MSFT) is a very popular stock among investors for many reasons. It has a large market cap and is one of the most well-known companies in the world. Additionally, it has a strong product lineup that includes some of the most popular software products used by businesses and individuals.

The stock can be found on several brokerage firms, including Fidelity Investments, Charles Schwab Corp., Vanguard Group, Morgan Stanley and Wells Fargo Advisors LLC.

3. Alphabet Inc. (GOOGL)

Alphabet Inc. (GOOGL) is also a large cap stock that is chosen often by investors. It is in the technology sector and was founded in 1998. Some of its products include Google, Android, YouTube and Chrome OS. The company has a market cap of over $800 billion and is headquartered in Mountain View, California.

Google Inc. (GOOG) was originally called BackRub but later changed its name to Alphabet due to an agreement with Stanford University’s Lawrence Library about naming rights for BackRub’s online database. Google Inc. (GOOGL) now owns this database as well as many others owned by Alphabet subsidiaries like JotSpot, Calico and X Development LLC.

Investing in Alphabet Inc. (GOOGL) is also very popular among investors because of its large market cap and name recognition among consumers worldwide.

4. Johnson & Johnson (JNJ)

Johnson & Johnson (JNJ) is a large cap stock that is often chosen by investors. It is in the healthcare sector and was founded in 1886. Some of its products include Band-Aid Bandages, Neutrogena skincare products and Tylenol pain relievers. The company has a market cap of almost $400 billion and is headquartered in New Brunswick, New Jersey.

One reason investing in Johnson & Johnson (JNJ) is popular among investors is the company’s diversified product lineup. It has a strong presence in the healthcare sector with products that are used by both consumers and businesses. Additionally, it has a long history of being a reliable and profitable company.

The stock can be found on several brokerage firms, including Fidelity Investments, Charles Schwab Corp., Vanguard Group, Morgan Stanley and Wells Fargo Advisors LLC.

5. GlaxoSmithKline plc (GSK)

GlaxoSmithKline plc (GSK) is a relative new large cap stock that is often chosen by investors. It is in the healthcare sector and was founded in 2000. Some of its products include Advair Diskus, Ventolin HFA and Lovaza. The company has a market cap of over $100 billion and is headquartered in Brentford, United Kingdom.

Investing in GlaxoSmithKline plc (GSK) is popular among investors because of the company’s strong presence in the healthcare sector. It has a large market cap and offers a variety of products that are used by both consumers and businesses. Additionally, it is a relatively new company that has yet to experience any major setbacks.

The stock can be found on several brokerage firms, including Fidelity Investments, Charles Schwab Corp., Vanguard Group, Morgan Stanley and Wells Fargo Advisors LLC.

6. Baidu Inc. (BIDU)

Baidu, Inc. (BIDU) is a technology stock that is popular among investors for many reasons. It has a large market cap and is one of the most well-known companies in the Chinese economy. Additionally, it has a strong product lineup that includes various services like search engines, maps and online shopping portals.

Founded in 2000, Baidu is now one of the top internet-based companies in both China and the United States.

Investing in Baidu, Inc. (BIDU) is popular among many investors for these reasons as well as its dominance of the online search industry in China. The company also provides a variety of other services, which are all used by consumers and businesses around the world.

7. JD.com Inc. (JD)

JD Sports Fashion Plc is a UK-based sportswear and multi-channel retailer of branded sports and leisurewear, combining global brands such as Nike, adidas, Puma and The North Face with own-brand labels such as Pink Soda and Supply & Demand. Its segments are Sportswear and Outdoor. The company’s sportswear brands include JD, Size?, Footpatrol, Finish Line, Shorpalaca, DTLR Villa, Livestock, Sprinter, Sports Zone, Chausport, Sizeer, JD Gyms, Tessuti, Scotts and Mainline. Its outdoor brands include Blacks, Millets, Ultimate Outdoors, Tiso, Go Outdoors, Go Fishing and Naylors.

8. Amazon.com, Inc. (AMZN)

Another great large cap stock is Amazon.com, Inc. (AMZN). It is in the technology sector and was founded in 1994. Some of its products include Amazon Web Services (AWS), Kindle devices and Alexa intelligent personal assistants. The company has a market cap of over $700 billion and is headquartered in Seattle, Washington.

One reason investing in Amazon.com, Inc. (AMZN) is popular among investors is because of the company’s vast product lineup. Amazon is a prominent player in the technology industry, selling items to both consumers and businesses. It has a large market capitalization as well as a long history of being a successful business.

9. Netflix, Inc. (NFLX)

The streaming giant offers a variety of entertainment services, including original TV shows and films. Netflix is also an innovator in the industry, showcasing new technologies like HDR video and 4K streaming. The company has a market cap of over $130 billion and is headquartered in Los Gatos, California.

Netflix, Inc. (NFLX) is one of the most popular stocks among investors for a variety of reasons. It offers a wide range of streaming entertainment services that are both popular and cutting-edge. Additionally, it is a well-established company with a large market cap. This makes it a relatively safe investment for those looking to add exposure to the technology sector.

10. Zoom Video Communications, Inc. (ZM)

Founded in 2010, Zoom Video Communications, Inc. (ZM) is one of the top players in the cloud-based video conferencing industry. It has a market cap of just over $8 billion and is headquartered in San Jose, California.

One reason for the company’s popularity among investors is its large market capitalization. Zoom is a well-known brand that offers reliable video conferencing solutions to both consumers and businesses all over the planet.

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Many large-cap stocks share the following characteristics:

  • A high degree of transparency – The vast majority of large-cap companies provide all the required filings with the Securities & Exchange Commission (SEC) and issue regular earnings reports. This allows investors to not only find but analyze public information about the companies they are interested in.
  • They may pay a dividend – Large-cap companies are typically in the mature phase of their business cycle. This means that many large-cap stocks pay dividends.
  • Large, stable companies – Because of their size, these companies generate predictable, stable revenue and earnings. The reason for this is that these stocks tend to have a correlation with the broader market. And large-cap companies tend to be market leaders. This gives them the resources to take innovative ideas from concept to creation.
  • You’re frequently investing in what you know – While not a guarantee of investment success, there is a benefit to investing in companies that have well-known brands. In fact, a tenet of Warren Buffett was to invest in companies who have businesses you understand.
  • Large-cap stocks are easily accessible – large-cap stocks are easy to buy and sell. This helps ensure adequate volume so that you can buy or sell a stock when you desire.
  • Diversification – The size of large-cap companies frequently gives investors exposure to multiple sectors in one stock. For example, an investment in a company like ExxonMobil (NYSE:XOM) gives investors exposure to the oil and gas sector as well as the commodities market and the renewable energy sector.
  • Many ways to invest – Large-cap stocks can be invested in as part of an index fund or an exchange-traded fund (ETF). These funds can allow investors to invest in particular sectors (e.g. financial, technology).

Are large-cap stocks the same as blue chip stocks?

The accurate answer is they can be, but not always. In general, analysts use a $5 billion market cap as the minimum point for a blue-chip stock. However, fundamental and technical analysts agree there are no specific financial metrics that automatically turn a stock into a blue-chip stock, nor does a stock’s intrinsic value suggest that it falls into the blue-chip category. With that said, most blue-chip stocks are large-cap stocks because of the way they behave.

However since market cap is the only specific criteria for defining a large-cap stock, not all large-cap stocks are blue-chip stocks. For example, all of the FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) are large-cap stocks. In fact Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) have two of the largest market caps on the market.

Many large-cap stocks pay a dividend

Most, but not all, large-cap stocks have a history of paying a dividend. And those that do frequently make dividend growth a primary goal. One of the reasons this is possible is because large-cap companies typically have rock solid balance sheets.

  • When looking for dividend stocks, investors can follow the advice of Ben Graham, author of The Intelligent Investor. Graham said that conservative investors should look for stocks that have a 20-year history of returning dividends. Many large-cap stocks meet this criterion. In fact, many large-cap stocks are also considered dividend aristocrats. This means the company has increased its dividend for at least 25 consecutive years.
  • In addition to providing a source of reliable, stable income an advantage of dividend stocks is the ability to reinvest dividends. This can produce a higher total return for investors than stocks that don’t pay a dividend.

Disadvantages to large-cap stocks

As mentioned earlier, large-cap stocks have a place in almost every portfolio. However, there are some disadvantages that investors need to weigh when deciding how large of their portfolio to allocate to large-cap stocks.

Better suited for buy-and-hold investors – Buy-and-hold investors would not see this as a disadvantage. However, investing today is increasingly weighted by investors who are seeking to profit off a quick trade. This is because large-cap stocks may not move as rapidly as a more nimble small-cap stock. To profit off large-cap stocks usually requires buying shares and holding them over time.

  • This brings up another potential disadvantage for growth investors. Large-cap stocks generally do not produce outsize returns. This is because they generally correlate with the broader market. Once again, this is not a disadvantage at all for value investors, but many of today’s younger investors are looking for growth, not value.
  •  A more pertinent concern for some investors is that it is more difficult for large-cap companies to pivot their organization to take advantage of changing market conditions.

How to invest in large-cap stocks

Investors can buy individual large-cap stocks or they can take advantage of the benefits of investing in mutual funds or exchange-traded funds (ETFs) that focus on large-cap stocks. This is a good way for novice investors to benefit from the benefits of this sector without having to pick and choose individual stocks.

The final word on large-cap stocks

Large-cap stocks deserve a place in every investor’s portfolio. However, like any investment they should not be the only stocks, particularly for younger investors who generally have a higher risk tolerance. For these investors, a path to wealth may include small cap and mid-cap stocks.

  1. Although large-cap stocks are commonly thought of as being blue-chip investments, all of the high-flying FAANG stocks fall under the category of large-cap stocks.
  2. There are many advantages that large-cap stocks offer. But there are a few drawbacks that depend on an investor’s personal investing style. For value investors, the fact that many of these stocks pay dividends can help investors generate income.
  3. Novice investors or investors who are contributing to a 401(k) or other retirement accounts should consider investing in mutual funds or exchange-traded funds (ETFs). This allows them to get tax advantages while still getting exposure to this diverse sector.

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Frequently asked questions

Large-cap stocks tend to be companies that are established in their markets with long-term histories. Some feel this makes them “safer” to invest in. Larger company stocks also often pay dividends, allowing you to capture some of the return of your investment, which some investors view as a benefit.

Large-cap stocks are shares in larger businesses, while small-cap stocks are shares in smaller companies. While there isn’t a single set definition, large-cap stocks generally are issued by any company worth $10 billion or more, while small-cap stocks come from those worth between $250 million and $2 billion.

Generally, market capitalization corresponds to a company’s stage in its business development. Typically, investments in large-cap stocks are considered more conservative than investments in small-cap or midcap stocks, potentially posing less risk in exchange for less aggressive growth potential.

5 key characteristics of large cap stocks:

  • Stability of business. Large cap companies generally have built reputation in the market over the long tenure of business.
  • Dividend payouts.
  • Available data for evaluation.
  • Quality of management and business.
  • Sync with the economy

Market cap doesn’t directly affect a company’s share price, since market cap is simply the company’s total outstanding shares multiplied by its share price. However, since market cap reflects a company’s perceived value in the eyes of investors, this can still drive up the share price over time.

Funds which invest a larger proportion of their corpus in companies with large market capitalization are called large cap funds. Large cap funds are known to offer stable and sustainable returns over a period of time, but might be outperformed by small and mid cap funds, which have higher risk exposure.

Here are the best large cap ETFs:

  • JPMorgan US Value Factor ETF
  • iShares Core S&P US Value ETF
  • Vanguard S&P 500 Value ETF
  • Nuveen ESG Large-Cap Value ETF
  • Vanguard Russell 1000 Value ETF
  • SPDR® Portfolio S&P 500 Value ETF
  • Hartford Multifactor US Equity ETF
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Freddy Agard
Freddy Agard

Freddy Agard writes daily about financial products and specializes particularly in the equity markets. He is happy to tell you more and enjoys reducing complex material to manageable and understandable information. Questions? Leave a comment at the bottom of the page!

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