Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
 
 
 
Blog Home
Bob Carey
Chief Market Strategist
Bio
X •  LinkedIn
 

  Betas Can Help Match One’s Equity Holdings With One’s Risk Tolerance
Posted Under: Sectors
Supporting Image for Blog Post

 
View from the Observation Deck  
  1. A beta is just one method used for measuring a stock's, or in this case a sector's, expected level of volatility relative to the broader stock market. 
  2. Betas offer investors a starting point for assessing whether or not a particular security or basket of securities potentially fits their risk profile. 
  3. In the chart above, the S&P 500 Index represents the broader market, and is assigned a beta value of 1.00.
  4. Those sectors in the chart with a beta of less than 1.00 are considered to be less risky than the S&P 500 Index, while those with a beta above 1.00 are considered riskier than the broader market.
  5. Beta values change over time. The S&P 500 Information Technology Index currently has a beta of 1.01, compared to 1.28 at the close of March 2000, the month in which the internet bubble burst, according to Bloomberg.
  6. Monitoring key fundamentals of the market such as betas, price-to-earnings ratios and earnings estimates can help an investor adhere to their risk tolerance level as well as potentially exploit opportunities in the market, in our opinion.  
This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. The respective S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector.  

Download a PDF of this post, please click here.
Posted on Tuesday, November 24, 2020 @ 12:52 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
Search Posts
MARKET ANALYSIS
Market Commentary and Analysis
Market Commentary Video
Monthly Talking Points
Quarterly Newsletter
Market Observations
Subscribe To Receive Email
 


 PREVIOUS POSTS
A Snapshot Of The S&P 500 Index Earnings Beat Rate
A Snapshot Of The U.S. Dollar
Every Year Looks Volatile Compared To 2017
A Snapshot Of Gold, Silver And The Miners
Sector Performance Via Market Capitalization (Since Trump Was Elected)
Passive vs. Active Fund Flows
The Real Rate of Return on the 10-Year Treasury Note is Negative
A Snapshot of Growth vs. Value Investing
S&P 500 Index Dividend Payout Profile
How Stocks Have Fared Since Donald J. Trump Was Elected President
Archive
Skip Navigation Links.
Search by Topic
Skip Navigation Links.

 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.