They are classified by total assets and turnover. Traditionally, the bigger the company the safer it is. Because they've been around for long, usually holds the biggest market share. But sometimes there's not much room to grow especially when the company is a defensive incumbent. Smaller cap companies have to innovate to grow and survive. But because they're smaller, they can go bust or get eaten out in their industry. But of course with that, they can be diamonds and grow really quickly and give you explosive returns. Invest in a mixture of all 3. The more risk you want to take, invest a little more in smaller cap. If you don't want to take too much risk, just go for large cap companies. But diversification is key here.