Market Capitalisation

Market cap determines each company's weight in an index. Understand how it affects your index fund and visualise your exposure with Index Balance.

Definition

Market capitalisation (market cap) is the total market value of a company listed on the stock exchange. It is calculated by multiplying the number of shares outstanding by the current share price. If a company has 100 million shares outstanding at €50 each, its market cap is €5 billion.

For the index fund investor, market cap is fundamental because it determines each company's weight in the most popular indices. The MSCI World and S&P 500 are market-cap-weighted indices: larger companies carry more weight. This means that in your MSCI World fund, a company like Apple or Microsoft can represent 3–4% of the total, while hundreds of smaller companies together make up just a few tenths of a percent.

Index Balance lets you see your portfolio's exposure by company size and region in real time. Try it free at indexbalance.com.

Practical example

In January 2024, Apple had a market cap of roughly $3 trillion, making it the largest company in the MSCI World with a weight of around 4.5%. A mid-sized company in the index might have a market cap of €10 billion and represent just 0.01% of the index. Your MSCI World fund automatically reflects these weights. Index Balance calculates this automatically every time you update your portfolio.