The appeal of having large-cap stocks in a retirement portfolio is undeniable. Companies such as Apple, Exxon, Pfizer and Bank of America are some of the biggest and best-known in the world. With market capitalization in the tens and hundreds of billions, these companies are the embodiment of the large-cap stocks that promise both growth and stability — two attributes prized by anyone planning for retirement.
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Market capitalization is a company's stock price multiplied by the number of shares in circulation, and any company with a capitalization exceeding $10 billion qualifies as large-cap.
While investor mutual funds made up of large-cap stocks have not, on average, fared as well in the 21st Century as their smaller-cap counterparts, "top performing large-cap growth mutual funds have managed to stay ahead of the broad stock market during that span," Doug Rogers of Investor's Business Daily said
"Most financial advisers counsel a bigger exposure to large cap than small cap," Bankrate reported
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A 2011 study by Gary A. Miller and Scott A. MacKillop of Frontier Asset Management, found that large-cap stocks have outperformed small-cap stocks over several decades when risk is taken into account, according to Financial Advisor Magazine
Granted, big companies with high market capitalization are not immune to volatility resembling the swings one associates with the small-cap sector.
"Even large-cap stocks fall prey to a downturn," Louis Navellier wrote for InvestorPlace
But Advisor Products called the Miller-MacKillop study "confirmation of the importance of effective diversification."
"The lesson is not to go with large caps only or to give them extra weight, but rather to invest in a broadly diversified mix of investments that fits your timetable, investment goals, and risk tolerance," Advisor Products said.
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