Mega-Cap Stock

A mega-cap stock is a company with a market capitalization above roughly $200 billion, a tier occupied by only a handful of the largest companies in the world at any given time. Mega caps carry outsized weight in cap-weighted indexes like the S&P 500, so their moves can dominate the index's overall return.

A basket of just the largest handful of mega caps has, in some recent years, accounted for a large share of the S&P 500's entire annual gain, which is a useful reminder that an index fund's diversification is often narrower in practice than its 500-company label implies.