Some say, “Buy mostly large caps. They are safe for regular folks. Mid caps and small caps are risky. So treat them like garnish, to be sprinkled on top if you feel like.”
Some others say, “Buy mostly mid caps and small caps. They’ll give you huge returns.”
Oversimplified (misguided?) advice.
Just because a company is large doesn’t make its stock safe. And just because it is small, doesn’t make it risky (nor does it make it a goldmine).
When you buy a giant like L&T without knowing what its divisions really do, it’s a risky stock. When you buy a large cap like NTPC without checking your ability to understand upcoming power projects, coal linkages and state electricity boards, it’s a risky stock. And especially, when you don’t buy it for a bargain price, a large cap is a risky stock.
Equally, just because a biotech business or cable distributor or transformer manufacturer is a small company, doesn’t make its stock a stairway to untold riches.
Ask, “What does the company actually do?” Is its position strong? Ask, “Does it provide you sufficient information?” Is the stock price attractive?
The size of a company doesn’t make its stock safer or riskier. No, what matters is its nature, your ability to grasp it and the buy price.