Author: Minich MacGregor Wealth Management

One cold January morning in 1494, the citizens of Florence, Italy woke up to an extremely rare sight: Their city was covered in snow. 

Snow is uncommon in Florence, and this was no mere coating of powdered sugar.  There was so much snow that kids today would probably grab their sleds and hightail it to the nearest hill.  So much snow that trucks with plows would be required just to keep the roads clear. 

It’s impossible to know how most Florentines reacted to their new winter wonderland, but we do know what one person thought.  When Piero de Medici, perhaps the wealthiest and most powerful man in Florence looked out that morning and saw his courtyard covered in snow, he decided to commission an artist. The artist in question was young, barely nineteen, with a permanently disfigured nose.  But his name would become famous throughout Europe, and the world has never forgotten it.   

His name was Michelangelo, and his task was as surprising as it was simple: Build a snowman.

Given the sculptures Michelangelo produced later in life, it’s reasonable to assume that his was the most beautiful snowman ever made.  (At least one other artist wrote that it was very beautiful.)  But we have no way of knowing exactly what Michelangelo’s snowman looked like…because it melted. 

It’s ironic to think of a great work of art so impermanent that it could literally melt.  It almost seems like a waste.  Why go to all that trouble creating something beautiful, knowing it will never last?  But we don’t think it was a waste.  In fact, when we ponder the story of Michelangelo’s snowman, we think there’s something meaningful we can take from it. 

Every January, many of us set New Year’s resolutions.  We make promises to ourselves about the goals we want to achieve and the ways we want to improve.  Go there, become this, do that.  But we all know that resolutions don’t always last.  Often, we may follow through on them for a month, or a season, or even a year…until life interrupts us.  When that happens, we often move onto other things, leaving our resolutions to melt away. 

But that doesn’t mean our resolutions were a waste.  It doesn’t mean the work we put into them was worthless. 

Think what often happens even when we fall short of our resolutions:

1. Sometimes, we return to our resolution months or years later, now armed with more knowledge and the experience gained from our first attempt.  Everything we need, in other words, to actually achieve it this time.
2. Sometimes, we may not achieve everything we set out to do, and yet our lives still become better for the attempt.  A person may not lose the 20 pounds they wanted, but the 10 pounds they did lose helped their blood pressure drop and their knees feel better.  A person may not quite learn how to speak French, but in the process, discover they have a real love and ability to cook French food.
3. Sometimes, even half-finished resolutions may lead us to the things we are truly meant to do.  Maybe you won’t “write in your journal every day” like you wanted, but instead learn you have a flair for writing and decide to write something else.  Maybe you won’t get that promotion you wanted…but instead get a different job that you end up loving more than you ever thought possible. 

Whenever we set goals and resolutions, whenever we lift our eyes up and aim just a little higher, we are shaping our lives into our own works of art.  Sometimes they don’t last – but the beauty is not in their permanence.  It’s in the ways they enrich our lives. The ways they help us get just a little closer to where we want to go…and become just a little more like who we want to be. 

Michelangelo’s snowman melted.  We don’t know what it looked like.  But we do know that he created something beautiful.  Something that enriched both his life and the lives of those who saw it, even if only for a little while. 

And we know something else, too.  We know what came after. 

For just ten years later, Michelangelo created a new sculpture, one that we can hope will never be lost to temperature or time.

It was the statue of David.

As we enter a New Year, we wish you best of luck with your goals and resolutions.  Please let us know if there is ever any way we can help you achieve them.  But most of all, we wish you joy in the journey.  May your resolutions get you ever closer to where you want to go…and become stepping stones and practice runs for whatever works of art you’re destined to create.

Happy New Year!   

Winter may bring snowy landscapes and cozy evenings by the fire, but it can also bring unexpected challenges for your home and budget. To make this season more about enjoying the cold and less about battling it, follow these practical tips to protect your space, save energy, and stay comfortable.

The only bad question is the one left unasked. That’s the premise behind many of our posts. Each covers a different investment-related question that many people have but are afraid to ask.

In recent posts, we’ve been breaking down some of the more common bits of financial jargon that you are likely to hear in the media.  In this message, let’s look at: 

Questions You Were Afraid to Ask #15:
What’s the difference between Large Cap, Mid Cap, and Small Cap stocks?

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If you’ve ever researched a stock or listened to talking heads in the media, you’ve probably heard terms like “large cap stocks” before.  You may also have seen these terms when reviewing your 401(k).  If so, you’ve probably wondered what the word “cap” even means. 

A stock’s “cap” refers to its market capitalization.  This is the total market value of a company’s available stock shares.  In essence, it is a quick and easy way to determine how valuable the market perceives a company to be. 

To determine a company’s market cap, investors look at all the shares the company has made available and then multiply that number by its current stock price.  For example, let’s say the ACME Corporation has twenty-five million available shares with a current stock price of $50.  Twenty-five million multiplied by fifty is 1,250,000,000, so ACME’s market cap is $1.25 billion.

Now, this number doesn’t mean anything on its own.  It’s when you compare it to other companies that distinctions can be made.  That’s where the terms large, mid, and small come in.

There is no single agreed-upon definition of what makes a company large-cap versus mid-cap, or mid-cap versus small-cap.  But generally speaking, many investors break down these categories like this:

• Large-Cap: Market value over $10 billion
• Mid-Cap: Market value over $2 billion
• Small-Cap: Market value over $250 million

So, in our example, ACME Corporation would be classified as a small-cap company. 

Some investors will make further distinctions.  For instance, you may sometimes see the term mega-cap, which is for companies with a market value over $200 billion.  At the other end of the spectrum, micro-cap refers to companies with a market value of less than $250 million. 

When people think about the stock market, they often think in terms of a specific index, like the S&P 500.  But different indexes often only contain companies above a specific size.  For example, the S&P 500 contains the five hundred biggest companies in the overall market. That means it only includes mega- and large-cap stocks.  Another popular index, the Russell 2000, contains only small-cap companies. 

One reason market cap matters is because it gives you more information about a stock than you can get just from its price.  For example, imagine two companies that each have a stock price of $75.  The first company has fifty million total shares available.  The second company has a billion shares.  That meansthe first company has a total market capitalization of $375 million.  The second company’s market cap, on the other hand, is $75 billion.  So, despite having the same price per share, the first company is a small-cap stock, and the second is a large-cap stock. 

Why is this important for investors to know? Because a stock’s cap can dramatically affect both its potential risk and potential reward. 

Generally speaking, large-cap stock companies are not going to grow as fast as a small-cap stock company can.  That’s because the former simply doesn’t have as much room for growth.  Large-cap companies tend to be older and more well-established. As a result, any future growth will likely be slow and steady rather than fast and explosive.  Small-cap companies, on the other hand, still have the potential to become large-cap companies in the future.  That means their potential for growth — and thus, reward — is greater. 

That said, large-cap companies have also tended to be more stable.  They have stronger financial situations, greater brand recognition, and more revenue.  That makes their stock price less vulnerable to market volatility.  Meanwhile, small-cap companies, even if they’re growing fast, may not technically be making any profit at all.  Their financial situation may be much weaker. That makes them much more vulnerable…and much riskier for investors. 

Of course, these are all just generalizations.  Large-cap companies can sometimes experience fast growth or even fail, of course.   Mid- and small-caps can thrive for years.  But as a general rule, there is an inverse relationship between a stock’s capitalization and both its risk and return.  Understanding that relationship is critical to making good investment decisions! 

So, that’s market capitalization in a nutshell.  Next time, we’ll look at a related bit of jargon: Blue chip stocks versus penny stocks.  Until next time! 

¹ “Market Cap Explained,” FINRA, https://www.finra.org/investors/insights/market-cap

HAPPY THANKSGIVING

Today, we pause to reflect on all we’re grateful for—family, friends, and the moments that bring us together.

Here at Minich MacGregor Wealth Management, we are thankful for our relationships with our clients and for the opportunity to help you however we can.

We wish you a day filled with love, laughter, and, of course, delicious food!