The small-cap stock category includes many of the small, emerging companies that have survived their initial growing pains and are now enjoying strong earning gains, along with expanding sales and profits. Today's small-cap stock may be tomorrow's leader — it can also be tomorrow's loser. Overall, such stocks tend to be very volatile and risky. A safe way of adding these to your portfolio can be through a professionally managed small-cap fund. That way, you'll have exposure to potentially explosive profits without the added risk of investing in a particular company.

Mid-cap stocks, as the name suggests, are bigger than small caps but smaller than large caps. Large-cap stocks are the biggest players in the stock market.

A large-cap corporation typically has a more solidly established presence and more reliable sales and profits than smaller corporations. Most of the time, larger companies make less risky investments than smaller companies; the trade-off, though, can be slower growth rates. Most investors hold large-cap stocks for the long-term, and for good reason: more than fifty years of historical market returns show that these corporate giants yield only slightly lower returns than short-term investments, with much less volatility.