Mid-Cap vs Small-Cap Stocks in Nigeria: Meaning, Examples, and How to Invest
If you’ve been exploring the stock market, either on the Nigerian Exchange (NGX) or through global platforms like Trove, you would have probably come across the terms “small-cap” and “mid-cap.”
But what do they actually mean, and more importantly, which one should you be investing in?
In this blog post, I’ll walk you through the key differences between mid-cap and small-cap stocks, using examples relevant to Nigerian investors, and show you exactly how to invest in them right from your phone.
What Is Market Cap?
Market cap (short for market capitalization) is the total value of a company’s shares. It’s calculated as:
Market Cap = Share Price × Number of Outstanding Shares
This value determines whether a company is classified as small-cap, mid-cap, or large-cap. It’s not about the price of one share but about the company’s total worth in the market.
There are generally three categories:
- Small-cap: $300 million–$2 billion
- Mid-cap: $2 billion–$10 billion
- Large-cap: Over $10 billion
What Is a Small-Cap Stock?
Small-cap stocks belong to relatively young or emerging companies with market caps between $300 million and $2 billion. These stocks are known for high growth potential, but they also come with higher risks.
In other words, you can say they are startups that are publicly traded. In Nigeria, examples include Premier Paints, Dunlop, and NCR Plc.
What Is a Mid-Cap Stock?
Mid-cap stocks represent companies worth between $2 billion and $10 billion. These are businesses that have moved past the startup phase, showing consistent revenue and profits.
They offer more stability than small caps but still retain decent growth potential. Nigerian examples include MTNN, UBA, and Nestlé Nigeria.
Differences Between Small-Cap and Mid-Cap
1. Growth Potential
Small-caps grow faster, but mid-caps grow more steadily. Small caps have more room to expand but also more risk. Mid-caps grow at a slower but more stable pace.
2. Risk
Small-caps are riskier; mid-caps are safer. Small companies struggle more during economic downturns. Mid-caps are stronger and more prepared for shocks.
3. Liquidity
Mid-caps are easier to buy and sell. More investors trade mid-cap stocks daily. Small-caps may take longer to sell.
4. Analyst Coverage
Mid-caps get more attention and research. You’ll find more data and analysis on mid-cap stocks, making decision-making easier.
Should You Choose Small-Cap or Mid-Cap as a Nigerian Investor?
- Based on Your Goals: Use small-caps for long-term growth and mid-caps for safer growth. Mix both depending on how fast and how safely you want your money to grow.
- Based on Your Risk Tolerance: If you can handle ups and downs, try small-caps. If not, stick to mid-caps. Young investors can afford to take more risk. Older or cautious investors should go with mid-caps.
How Nigerians Can Invest in These Stocks Using
With the Trove app, you can invest in U.S. small-cap and mid-cap stocks right from your phone.
Trove gives you access to over 4,000 stocks and ETFs, including popular small-cap and mid-cap options.
- Download the Trove app from the Play Store or App Store.
- Create your account and complete your KYC in minutes.
- Fund your wallet using your Naira or USD balance.
- Search for small-cap or mid-cap stocks or ETFs
- Start investing with as little as ₦1,000.
You don’t need a U.S. bank account or a dollar card. Trove makes cross-border investing simple and secure for Nigerians.
Conclusion
There’s no one-size-fits-all answer when it comes to choosing between small-cap and mid-cap stocks. Small-caps offer higher growth potential but come with more risk. Mid-caps are more stable and safer, but their growth is slower and steadier.
As a Nigerian investor, the best approach is to know your goals, understand your risk tolerance, and then diversify your portfolio with both small and mid-cap options. And thanks to platforms like Trove, you don’t have to fly abroad to invest; you can start right from your phone, with as little as ₦1,000.
Remember, investing is a marathon, not a sprint. The more informed you are, the better your money choices.
