Quora Answer: Should I Invest in Larger or Smaller Companies ?

The following is my answer to a Quora question: “I am just getting started investing.  Should I invest in larger companies or smaller?”

Where I am, in Singapore, we understand a large company to have an annual sales turnover in excess of $100 million.  Anything less than that is a small or medium company.  We use the term “Small & Medium Enterprises” (SME).

If you have just started investing, it would be better for you to stick to larger companies.  Their stock is generally less volatile, and is not likely to lose substantial value in a short period of time.  These stocks tend to be rated, and you should choose the ones that are investment grade rated.  They carry the least risk.  Aside from that, do not put your money in a business you do not understand.  You have to understand what the company does, what its major revenue stream is, and how you expect it to perform over the investment period.  This involves some homework.  Another factor of consideration is currency exposure.  Put your money closer to home, so that you do not lose money due to the exchange rate eating into your growth.  Currency exposure is related to political risk.