Quick Definitions (What is a Commodity, What is a Stock Index, What is Market Capitalization?)

What is a Commodity?

A commodity as it is defined in the financial markets is a physical good that is considered the same as all other goods of that same commodity classification. For example: cattle is a commodity. One cow is considered the same as any other cow. If you buy a cow, you just bought a commodity. Other examples of commodities would be oil, coffee beans, gold, etc.

What is a Stock Index?

A stock index is a large basket of stocks. A single number has been obtained by manipulating the prices of the individual stocks within that basket (usually a weighted average). For example: The S&P 500 is a stock index. It is composed of 500 large companies. Its price is a weighted average of the component prices. The Dow Jones Industrial Average (the Dow in common usage on every TV set and newspaper in the country) is an index made of 30 large companies.

What is Market Capitalization?

Market capitalization of a stock is the price per share multiplied by the total number of shares that are out there in the market. There are 4 main classifications of market capitalizations.

Microcap: $0.00 to $300 million

Small Cap: $300 million to $2 billion

Mid Cap: $2 billion to $10 billion

Large Cap: $10 billion and up

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