What is beta stocks, you have already heard of the term high beta or low beta stocks in the share market, what does it mean and how this term ‘beta’ supports the investor to select the company and earn good amount of profit.
In this article, we will get to know about the high beta or low beta stocks and their advantages and disadvantages.
Beta is a comparison of the market and the stock price and also measures the volatility of the stock. In the stock market, the same companies are popular as high beta stocks and some holds as Low beta stocks.
It is calculated directly to the market as a whole, If the beta is more then 1, it is said to be high beta stocks and if the beta is less then 1, then it is Low beta stocks. Beta also indicates the kind of investor involvement in the share if the market is high, the investor sentiments towards the share are high and the impact is the movement is more then the market.
The term beta is generally used in mutual funds whether the performance of the mutual fund is as compared to the market as the whole.
Advantages of Beta
Beta offers a clear indication to measure the point at which the company movement is better than the market movement. It will highlight the majors in which the company taking advantages of the situation.
Beta is basically related to the sentiments of the investors, this also identifies the groups of investors like insurance companies, FII, mutual funds etc. which are interested in the company.
Disadvantages of Beta
For the new investor, beta is not a good tool to understand, ever time the movement variation of future will not be the footprints to follow. For the purpose of long-term investment we can not predict the variation, it is less useful.
High Beta Stocks
High beta stocks are those stocks which are traded in the market with high volume and the reaction of the price of those shares will, changes with the frequent changes in the market.
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