Investing 101: Risk Terminology - BETA

About thirty years ago, statisticians armed with all of their statistical theories began to confront the financial markets. A handful of useful tools emerged that the average investor should be familiar with when they look to purchase stocks.

One secret that people "in the know" use is "BETA". "Beta" is a number which reflects how volatile a stock has been relative to the market. This number is also quoted on most quotation services so it is easy to get to, but I have often found that it is never defined. A BETA of 1.00 means that on average, a stock has traditionally matched the markets swings both on the upside and on the downside. A BETA greater than 1.00 reflects above average market volatility, and a BETA of less than 1.00 indicates below average market volatility. When a BETA is less than zero it indicates that the stock moves contrary to the general market, going down in bull markets and rising in bear markets.. It used to be the case that Gold mining stocks would have negative betas. Internet stocks for example have very high betas.

Many of the analysts that cross your TV screen and make recommendations use BETA as their primary screening device in searching for suitable investments. So the next time your broker calls with an investment recommendation, ask him what the BETA is and then relish the silence on the other end of the phone. Then send him a copy of this article!

Dowjonesfully,
-Harald Anderson
http://www.eOptionsTrader.com

Harald Anderson is the founder and Chief Analyst of eOptionsTrader.com a leading online resource of Options Trading Information. He writes regularly for financial publications on Risk Management and Trading Strategies. His goal in life is to become the kind of person that his dog already thinks he is. http://www.eOptionsTrader.com.

---

Retirement ? Its Sooner Than You Think!! (Honestly)

Many people hear "retirement" and think- what? 401K? Roth vs.... Read More

Have You Ever Seen A Map of the World Turned Upside Down?

For those accustomed to viewing things a certain way, it... Read More

Buying a Home - Your BIGGEST Investment

This column has often focused on intangible investments like stocks... Read More

Trading For A Living - Part 2

In part 1 of this article I started to look... Read More

Maniac Investment

Let's first understand what maniac means. According to Webster a... Read More

Oil and Gasoline Price Uncertainties

The Light Crude Continuous Contract hit an all-time high at... Read More

Powerful Options Basics Lessons Improving your trading in 180 days.

An option is a traded security that is a derivative... Read More

Day Trading the SP Futures with Initial S/R and the NYSE TICK

For instance, if the market moves up in the first... Read More

An Economical Retirement Investment Plan

The practice of economy, directed toward a retirement investment plan... Read More

Retire Dollar Smart

Jim Miller is a registered investment advisor. This means that... Read More

Overbought/Oversold

Has your broker ever told you that a stock is... Read More

5 Ways To Protect Your Bond Portfolio From Rising Interest Rates

The Federal Reserve recently raised its target federal funds rate... Read More

Why You Need To Buy and Sell Gold Coins (Part 2)

How to Collect Rare Coins For Fun and ProfitTime has... Read More

Discipline in Investing and Trading

Discipline can be simply defined as your ability to follow... Read More

Porters Five Forces Analysis

If you've ever listened to Warren Buffett talk about investing,... Read More

Remembering TEOTWAWKI and Learning from It

Its only been about 5 years since we had major... Read More

Finding False Gold in Penny Stock

As far as traders go, many do not see the... Read More

Landlording 101, Tricks of The Trade

Looking Inside Your Tenant's Mind Basic Mind-Reading Report 101 for... Read More

Investing Psychology Today Requires All Traders to Awaken Their Speculator Minds

Stock trading strategies are as rampant today, as they were... Read More

Creating Momentum with Options - Pro and Cons of At-the-money, In-the-money, and Out-of-the-money

To create momentum in your options trading you need to... Read More

How to Use Annual Report

There are many steps in calculating the fair value of... Read More

Can Your Annuity Do This?

Many people buy annuities according to their agent's recommendations. However,... Read More

Asset Location ? Increase Investing Returns & Reduce Your Taxes

Location ? Once the holy grail only for real estate... Read More

Investing Online Has Its Rewards: Find Out How To Take Advantage Of Them

Computerized investing. Online investing. Have you taken the next step... Read More

Sell Discipline for Investors: Importance and Execution

Investors usually don't have an aversion to buying an asset.... Read More

Critical Options Investing Tip When Trading Naked Calls and Puts

An option is a derivative trading product that is best... Read More

Trading Tips No 4: Technical Analysis The Holy Grail Syndrome

Everyone knows that the Holy Grail of investing and trading... Read More

Chinas Inscrutable Currency Strategy

Purpose: Expose Opportunities for Smart InvestorsThe move by China's central... Read More

Real Estate Clubs Hot Among Investors

Six or seven years ago, the stock market was booming,... Read More

Foreign Investing - US Investors Still Missing Out?

Investors are still too slowly realizing what the academics have... Read More

Making It Second Nature

Not long ago I was laying on my son's floor... Read More

Trading Tips No 3: Online Trading and Investing: Buy, Hold, and Hope

So you have learned how to trade the markets by... Read More

Pros & Cons of Investing in Bonds

What are Bonds?A bond is a debt security, by which... Read More