What is Portfolio's Beta?

portfolio analyzer
Co-Authored and Reviewed by Gagan Sandhu, MBA - The University of Chicago Booth School of Business, CEO of Xillion
Posted on . 2 min read

Stock market is down by 1%, but why is my portfolio down by 2%? 🤯

The answer is your portfolio beta is high! ⬆️

So, what is Portfolio Beta (β)? 🤔

A portfolio's beta (β) is used to measure how risky the portfolio is compared to the index (usually the S&P 500).

For example, if the portfolio's beta is 2, it means that if the stock market goes up by 1% then the portfolio will go up by 2% and vice versa.

β > 1 means your portfolio is more volatile than the index. You're taking an aggressive approach. ⚡⚡

β = 1 means your portfolio is as volatile as the index. Its better to switch to Index Funds/ETFs 🧘🧘

β < 1 means your portfolio is less volatile than the index. You're taking a conservative approach. 🔰🔰

-ve β means your portfolio moves in the opposite direction of the index. ⬇️ ⬇️

What is a Good Beta (β)? 💝

A good beta for you is based on your risk appetite and your goals. 🎯

If you wish to replicate the market performance, buy an Index Fund/ETF. 🧘

If you are conservative and want to preserve the principal, a lower beta portfolio might be ideal. 🔰

If you are aggressive and want to generate market-beating returns, go for a higher beta portfolio 🚀. But be tolerant and patient when the market goes down as your portfolio will even go down further. 🔥

How to calculate Portfolio Beta (β)?

Don't worry, that's on us! :) 🚀 Check Xillion's Portfolio Analyzer 🚀

Share this:
You may also like...
Are you holding any of these stocks in your portfolio?
wealth creators
Posted on . 1 min read
👶 Gen Z was the only generation with rising 401k balances in 2022
gen z
portfolio optimizer
Posted on . 2 min read