S&P 500   4,191.98
DOW   33,426.63
QQQ   336.51
Mount Etna volcano erupts, raining ash on Catania, forcing flight suspension at local airport
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
China tells tech manufacturers to stop using Micron chips, stepping up feud with United States
Stock market today: Asian shares mostly rise despite worries about US debt talks
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
SpaceX launches two Saudi astronauts on private flight to space station
Civil rights groups warn tourists about Florida in wake of 'hostile' laws
Central Bank: “Final stage” beginning now (Ad)
South Korean, German leaders agree to cooperate on supply chains, North Korea
Animal rights activists protest octopus farm plans in Spain
S&P 500   4,191.98
DOW   33,426.63
QQQ   336.51
Mount Etna volcano erupts, raining ash on Catania, forcing flight suspension at local airport
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
China tells tech manufacturers to stop using Micron chips, stepping up feud with United States
Stock market today: Asian shares mostly rise despite worries about US debt talks
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
SpaceX launches two Saudi astronauts on private flight to space station
Civil rights groups warn tourists about Florida in wake of 'hostile' laws
Central Bank: “Final stage” beginning now (Ad)
South Korean, German leaders agree to cooperate on supply chains, North Korea
Animal rights activists protest octopus farm plans in Spain
S&P 500   4,191.98
DOW   33,426.63
QQQ   336.51
Mount Etna volcano erupts, raining ash on Catania, forcing flight suspension at local airport
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
China tells tech manufacturers to stop using Micron chips, stepping up feud with United States
Stock market today: Asian shares mostly rise despite worries about US debt talks
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
SpaceX launches two Saudi astronauts on private flight to space station
Civil rights groups warn tourists about Florida in wake of 'hostile' laws
Central Bank: “Final stage” beginning now (Ad)
South Korean, German leaders agree to cooperate on supply chains, North Korea
Animal rights activists protest octopus farm plans in Spain
S&P 500   4,191.98
DOW   33,426.63
QQQ   336.51
Mount Etna volcano erupts, raining ash on Catania, forcing flight suspension at local airport
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
China tells tech manufacturers to stop using Micron chips, stepping up feud with United States
Stock market today: Asian shares mostly rise despite worries about US debt talks
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
SpaceX launches two Saudi astronauts on private flight to space station
Civil rights groups warn tourists about Florida in wake of 'hostile' laws
Central Bank: “Final stage” beginning now (Ad)
South Korean, German leaders agree to cooperate on supply chains, North Korea
Animal rights activists protest octopus farm plans in Spain

Low Beta Stocks

Beta is the a calculation that measures the relative volatility of a stock in correlation to a particular standard. For U.S. stocks that standard is usually, but not always, the S&P 500. Beta is a form of regression analysis and it can be useful for investors regardless of their risk tolerance. Beta is considered one of the few data points that can be beneficial for practitioners of both fundamental analysis and technical analysis. This page lists stocks that have unusually low beta calculations, meaning there is little correlation between the price moves of these stocks and the S&P 500. Learn more about low beta stocks.

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Analyst ConsensusUpgrade to All Access to use the All Ratings Filter
CompanyCurrent PriceBetaPE RatioMarket CapVolumeAverage VolumeIndicator(s)
Lanvin Group Holdings Limited stock logo
LANV
Lanvin Group
$5.20
-2.8%
0.0115.76$681.05 million350,000291,149Upcoming Earnings
News Coverage
Tio Tech A stock logo
TIOA
Tio Tech A
$10.18
-0.1%
0.0127.51$437.94 million900359,086
Frontier Investment Corp stock logo
FICV
Frontier Investment
$10.31
+0.2%
0.0160.65$257.75 million4,40041,340News Coverage
Valor Latitude Acquisition Corp. stock logo
VLAT
Valor Latitude Acquisition
$10.28
+0.2%
0.0133.16$295.55 million10085,021
Primavera Capital Acquisition Co. stock logo
PV
Primavera Capital Acquisition
$9.90
+0.2%
0.0130.00$532.13 million75,600103,184News Coverage
Gap Up
STET
ST Energy Transition I
$10.47
+0.2%
0.0115.40$316.09 million37,400317,106
Citizens Holding stock logo
CIZN
Citizens
$12.56
-2.0%
0.028.10$70.46 million2,0003,870
Data Knights Acquisition Corp. stock logo
DKDCA
Data Knights Acquisition
$10.94
+0.5%
0.02364.67$82.82 million118,00011,030High Trading Volume
International Seaways, Inc. stock logo
INSW
International Seaways
$38.82
+2.3%
0.023.37$1.91 billion538,600653,463
Pathfinder Bancorp, Inc. stock logo
PBHC
Pathfinder Bancorp
$12.58
-3.2%
0.036.08$58.50 million9,6002,468News Coverage
High Trading Volume
OXAC
Oxbridge Acquisition
$10.85
-0.1%
0.03155.00$45.32 million1008,390
ENCP
Energem
$10.70
+0.2%
0.04214.00$36.38 million1,3003,303
TDCX Inc. stock logo
TDCX
TDCX
$8.28
-1.4%
0.0416.24$1.18 billion15,30075,669
Siebert Financial Corp. stock logo
SIEB
Siebert Financial
$2.29
+2.2%
0.0432.71$74.45 million63,300173,526
Black Spade Acquisition Co stock logo
BSAQ
Black Spade Acquisition
$10.31
+0.1%
0.0441.24$217.80 million112,80080,294
Palomar Holdings, Inc. stock logo
PLMR
Palomar
$52.37
+2.8%
0.0424.36$1.30 billion149,400146,577
ZTO Express (Cayman) Inc. stock logo
ZTO
ZTO Express (Cayman)
$28.75
-1.0%
0.0421.46$17.85 billion4.63 million2.74 million
Fanhua Inc. stock logo
FANH
Fanhua
$7.53
-2.2%
0.0528.96$404.51 million34,50028,950Upcoming Earnings
News Coverage
Positive News
Cullman Bancorp, Inc. stock logo
CULL
Cullman Bancorp
$10.59
+0.2%
0.0619.98$78.15 million1,6002,687
Full Truck Alliance Co. Ltd. stock logo
YMM
Full Truck Alliance
$5.86
-0.5%
0.07117.22$6.48 billion7.04 million6.36 million
Procaps Group S.A. stock logo
PROC
Procaps Group
$4.45
-1.3%
0.0810.85$502.05 million30029,362
OraSure Technologies, Inc. stock logo
OSUR
OraSure Technologies
$5.41
+0.9%
0.0813.87$396.34 million546,300579,703
Tsakos Energy Navigation Limited stock logo
TNP
Tsakos Energy Navigation
$17.78
+2.5%
0.093.04$524.69 million202,000383,425Gap Up
Nordic American Tankers Limited stock logo
NAT
Nordic American Tankers
$3.70
+2.8%
0.0961.67$772.56 million2.77 million3.11 million
InnSuites Hospitality Trust stock logo
IHT
InnSuites Hospitality Trust
$1.47
-0.7%
0.1024.50$13.49 million7,90049,306Analyst Report
Positive News
Gap Down
Cullinan Oncology, Inc. stock logo
CGEM
Cullinan Oncology
$9.17
+4.2%
0.107.52$360.94 million139,900200,999
Credit Suisse X-Links Gold Shares Covered Call ETN stock logo
GLDI
Credit Suisse X-Links Gold Shares Covered Call ETN
$144.79
-0.5%
0.10185.68$57.92 million3,9005,405Ex-Dividend
Chemung Financial Co. stock logo
CHMG
Chemung Financial
$34.53
-1.0%
0.115.56$162.64 million9,40013,584Dividend Announcement
News Coverage
HMN Financial, Inc. stock logo
HMNF
HMN Financial
$18.12
+0.3%
0.129.69$81.36 million1,1002,895
Vasta Platform Limited stock logo
VSTA
Vasta Platform
$3.31
-4.3%
0.1323.64$273.57 million11,80014,231
Magyar Bancorp, Inc. stock logo
MGYR
Magyar Bancorp
$10.08
+0.6%
0.138.20$67.44 million8,2004,114
Tootsie Roll Industries, Inc. stock logo
TR
Tootsie Roll Industries
$37.90
+1.0%
0.1334.68$2.67 billion158,900130,341
Mid-Southern Bancorp, Inc. stock logo
MSVB
Mid-Southern Bancorp
$9.20
+0.3%
0.1314.15$26.54 million2,9002,911
Chunghwa Telecom Co., Ltd. stock logo
CHT
Chunghwa Telecom
$41.24
+0.8%
0.1326.10$31.99 billion100,000118,724
Superior Drilling Products, Inc. stock logo
SDPI
Superior Drilling Products
$0.98
+0.1%
0.1312.26$28.69 million37,30076,126
The Vita Coco Company, Inc. stock logo
COCO
Vita Coco
$24.42
-0.2%
0.14111.01$1.37 billion294,300316,382Positive News
Globus Maritime Limited stock logo
GLBS
Globus Maritime
$0.94
+0.5%
0.140.79$19.35 million15,10070,947Analyst Report
POINT Biopharma Global Inc. stock logo
PNT
POINT Biopharma Global
$10.30
-1.4%
0.1412.26$1.09 billion663,900633,125
Ohio Valley Banc Corp. stock logo
OVBC
Ohio Valley Banc
$24.25
-1.0%
0.148.82$115.92 million2,9004,155Dividend Announcement
Gravity Co., Ltd. stock logo
GRVY
Gravity
$59.48
+2.1%
0.155.36$413.39 million11,50021,947
First Trust California Municipal High Income ETF stock logo
FCAL
First Trust California Municipal High Income ETF
$48.78
-0.4%
0.15128.37$119.51 million26,80014,899
Blue Foundry Bancorp stock logo
BLFY
Blue Foundry Bancorp
$9.01
-1.2%
0.15450.73$238.24 million137,500124,116
Global Cord Blood Co. stock logo
CO
Global Cord Blood
$2.99
+34.7%
0.164.67$363.44 million9.28 million216,519Analyst Report
High Trading Volume
Artesian Resources Co. stock logo
ARTNA
Artesian Resources
$48.50
-12.0%
0.1626.80$461.24 million292,20042,350Gap Down
High Trading Volume
Hormel Foods Co. stock logo
HRL
Hormel Foods
$39.34
+0.2%
0.1721.98$21.50 billion2.19 million1.98 million
International General Insurance Holdings Ltd. stock logo
IGIC
International General Insurance
$8.65
+4.6%
0.174.20$406.81 million47,70046,117Dividend Announcement
The Duckhorn Portfolio, Inc. stock logo
NAPA
Duckhorn Portfolio
$13.68
-2.1%
0.1727.92$1.58 billion481,500500,506
TD Holdings, Inc. stock logo
GLG
TD
$0.59
-1.9%
0.174.98$85.09 million142,900389,554Gap Down
Columbia Financial, Inc. stock logo
CLBK
Columbia Financial
$15.38
-2.2%
0.1919.23$1.63 billion121,100200,254Positive News
Utah Medical Products, Inc. stock logo
UTMD
Utah Medical Products
$92.74
-1.0%
0.1919.69$336.65 million3,9008,615News Coverage
Biogen Inc. stock logo
BIIB
Biogen
$308.48
+1.0%
0.1914.32$44.65 billion568,700976,835
Global Self Storage, Inc. stock logo
SELF
Global Self Storage
$5.05
-0.8%
0.2120.20$56.28 million18,20018,822
Virtu Financial, Inc. stock logo
VIRT
Virtu Financial
$18.10
-0.4%
0.219.14$2.98 billion822,9001.30 million
The J. M. Smucker Company stock logo
SJM
J. M. Smucker
$151.89
+0.0%
0.2122.88$16.20 billion770,200895,240
Frontline plc stock logo
FRO
Frontline
$14.78
+2.0%
0.216.87$3.29 billion2.73 million3.56 millionUpcoming Earnings
Positive News
Gap Up
BioNTech SE stock logo
BNTX
BioNTech
$106.49
+1.5%
0.214.09$25.90 billion481,000684,699
Old Point Financial Co. stock logo
OPOF
Old Point Financial
$16.80
+1.3%
0.218.28$83.50 million6,6004,222Dividend Announcement
Gap Down
Lancaster Colony Co. stock logo
LANC
Lancaster Colony
$207.60
-0.4%
0.2243.61$5.71 billion92,500150,378Dividend Announcement
Autohome Inc. stock logo
ATHM
Autohome
$30.02
-0.7%
0.2213.65$3.77 billion991,100592,575
First Capital, Inc. stock logo
FCAP
First Capital
$25.07
+3.4%
0.226.38$84.24 million5004,747Gap Up
BayFirst Financial Corp. stock logo
BAFN
BayFirst Financial
$14.00
-1.8%
0.22175.00$57.40 million4002,675
Euronav NV stock logo
EURN
Euronav
$16.77
+3.7%
0.228.02$3.38 billion1.02 million2.01 million
Nathan's Famous, Inc. stock logo
NATH
Nathan's Famous
$69.66
+0.3%
0.2215.45$284.21 million5,8006,118
Regeneron Pharmaceuticals, Inc. stock logo
REGN
Regeneron Pharmaceuticals
$759.05
+1.5%
0.2320.63$82.98 billion555,800552,505
United Bancorp, Inc. stock logo
UBCP
United Bancorp
$11.85
+0.3%
0.237.75$70.03 million2,3004,498
Happiness Development Group Limited stock logo
HAPP
Happiness Development Group
$4.50
+1.4%
0.239.38$31.30 million1,50014,340
Sterling Check Corp. stock logo
STER
Sterling Check
$12.39
+0.5%
0.2488.50$1.21 billion98,000152,758
Employers Holdings, Inc. stock logo
EIG
Employers
$37.44
-0.2%
0.2413.76$1.01 billion141,300135,538
iHuman Inc. stock logo
IH
iHuman
$3.64
-3.2%
0.2412.13$195.00 million4,20028,193Gap Down
Greene County Bancorp, Inc. stock logo
GCBC
Greene County Bancorp
$20.78
-1.6%
0.2511.32$353.88 million9,90021,856
Kanzhun Limited stock logo
BZ
Kanzhun
$17.40
+2.0%
0.25348.00$6.52 billion2.74 million2.59 millionUpcoming Earnings
Perma-Pipe International Holdings, Inc. stock logo
PPIH
Perma-Pipe International
$10.30
+0.4%
0.2514.31$82.40 million6,0008,043
Coterra Energy Inc. stock logo
CTRA
Coterra Energy
$25.63
+0.7%
0.254.89$19.41 billion7.69 million8.49 millionAnalyst Report
Peoples Financial Services Corp. stock logo
PFIS
Peoples Financial Services
$38.94
-1.4%
0.257.79$278.42 million6,4009,968
FVCBankcorp, Inc. stock logo
FVCB
FVCBankcorp
$9.43
+0.3%
0.259.68$166.91 million19,50056,098
Third Coast Bancshares, Inc. stock logo
TCBX
Third Coast Bancshares
$16.11
+0.1%
0.269.82$218.77 million40,60034,046
FinWise Bancorp stock logo
FINW
FinWise Bancorp
$7.88
+0.9%
0.265.40$101.06 million13,80013,233Gap Up
General Mills, Inc. stock logo
GIS
General Mills
$87.63
-1.0%
0.2718.93$51.47 billion4.15 million3.24 million
ESSA Bancorp, Inc. stock logo
ESSA
ESSA Bancorp
$13.10
+0.4%
0.276.27$136.24 million21,20013,300
Arko Corp. stock logo
ARKO
Arko
$7.62
+2.6%
0.2816.21$916.72 million520,200212,196Gap Up
High Trading Volume
Natural Resource Partners L.P. stock logo
NRP
Natural Resource Partners
$49.55
-1.5%
0.283.65$626.31 million16,90025,292
Spok Holdings, Inc. stock logo
SPOK
Spok
$13.06
-1.1%
0.288.11$260.55 million175,900211,796
Citizens Financial Services, Inc. stock logo
CZFS
Citizens Financial Services
$79.99
+0.5%
0.2810.87$317.56 million9,10015,163Positive News
Premier, Inc. stock logo
PINC
Premier
$26.72
+0.2%
0.2817.35$3.18 billion672,100658,845
C&F Financial Co. stock logo
CFFI
C&F Financial
$50.54
+1.0%
0.285.88$173.35 million43,4007,051Dividend Announcement
High Trading Volume
Bank First Co. stock logo
BFC
Bank First
$69.22
-1.7%
0.2812.99$719.20 million14,20020,446
FTI Consulting, Inc. stock logo
FCN
FTI Consulting
$182.06
+1.9%
0.2829.13$6.19 billion267,300236,329Positive News
Jewett-Cameron Trading Company Ltd. stock logo
JCTCF
Jewett-Cameron Trading
$4.67
-1.1%
0.2866.72$16.35 million1,6004,553
National HealthCare Co. stock logo
NHC
National HealthCare
$59.78
+0.5%
0.2949.00$915.83 million37,30070,255
QuidelOrtho Co. stock logo
QDEL
QuidelOrtho
$87.44
+0.5%
0.2948.04$5.83 billion349,000331,019Positive News
Oak Valley Bancorp stock logo
OVLY
Oak Valley Bancorp
$23.40
-0.3%
0.296.46$193.75 million7,20025,415
The Clorox Company stock logo
CLX
Clorox
$166.36
+0.2%
0.30286.83$20.57 billion923,2001.24 millionAnalyst Revision
USCB Financial Holdings, Inc. stock logo
USCB
USCB Financial
$9.56
-2.6%
0.309.10$187.57 million9,80027,970Gap Up
Steel Connect, Inc. stock logo
STCN
Steel Connect
$0.83
+0.5%
0.301.51$50.45 million79,70081,851Gap Up
Equity Commonwealth stock logo
EQC
Equity Commonwealth
$21.14
0.0%
0.3045.96$2.32 billion1.35 million1.18 millionAnalyst Downgrade
Blue Ridge Bankshares, Inc. stock logo
BRBS
Blue Ridge Bankshares
$8.69
+1.0%
0.3013.79$164.59 million42,00029,686Gap Up
SWK Holdings Co. stock logo
SWKH
SWK
$16.92
-0.2%
0.3114.97$216.75 million6,60011,694
ICC Holdings, Inc. stock logo
ICCH
ICC
$16.40
-0.6%
0.3134.89$51.66 million8001,349
The Hershey Company stock logo
HSY
Hershey
$266.04
-0.3%
0.3132.29$54.38 billion1.26 million1.02 million
FNCB Bancorp, Inc. stock logo
FNCB
FNCB Bancorp
$5.81
+1.0%
0.316.12$114.34 million17,40020,603Gap Up

What Are Low Beta Stocks

Many retail investors assume that you can’t predict the stock market. And since you can’t predict it, they assume that investing in stocks carries a certain amount of risk. Well, as it turns out, there is a way to assess the risk of a particular security: it’s called beta. Low beta stocks are those securities that carry the lowest amount of risk.

How to Use Low Beta Stocks to Minimize Risk and Increase Returns

Beta is essentially a measure of a stock’s volatility. Risk level is one of the most important stats to analyze in terms of investing in stocks. A comparison of a stock’s risk factor to your own level of risk tolerance will help you know whether to buy, sell, or avoid a certain security. Beta is the number that will help you understand a stock’s level of risk and make those decisions.

What Is the Beta of a Stock?

In the simplest terms, beta is a tool that compares how volatile a stock is in comparison to the overall market. The stock market is the “control” and has a definitive benchmark beta of 1.0, while each individual security is the “variable,” with a beta that varies in terms of how much the stock moves around.

A stock that is more volatile than the market has a beta of more than 1.0, while a stock that is less volatile than the market has a beta of less than 1.0. If you’re a short-term trader riding the market waves and looking at stock market gainers, stock beta can let you know which securities might be the riskiest—then you can decide whether or not to get involved.

As you can see from this explanation, risky stocks are not the only ones that carry risk. Every one of the individual stocks can be viewed as a risky stock to some degree, even if the degree is negligible. Even in bull markets, when it seems like the sky’s the limit forever, it’s impossible for a stock to mirror the benchmark.

How to Calculate Beta

The beta of a stock is calculated using regression analysis. In short, regression analysis is all about comparing one stable variable with other changing variables. The formula for calculating a stock’s beta is simple in theory—beta is found by dividing covariance by variance.

Covariance represents how similar or dissimilar two numbers are in their movements—in this case, a stock is being compared to the market. Positive numbers indicate that their movement is similar. Negative numbers indicate that their movements are different.

Variance represents how much the “control” variable bounces around in comparison to its mean—its normal state. To keep it short and sweet, a stock’s beta is calculated with the intention of assessing how similar or divergent a stock’s movement is in comparison to the market—and thereby determining its volatility. Beta, in turn, can be worked into a complex equation to create a Capital Asset Pricing Model (CAPM). This equation helps calculate the expected return of an asset, using its risk-free rate as a starting point (a hypothetical rate of return involving no risk).

Beyond beta, other formulas, such as the Sharpe Ratio—which uses standard deviation—can help investors determine how much additional yield they’ll get for every increase per unit of risk. Then there is tracking error, which helps investors understand how much performance has deviated from the intended benchmark.

As you can see, beta is the gateway stat for an in-depth, computational way of growing equity through leveraging statistical opportunities in the stock market. 

Low Beta Strategy

Low Beta Strategy focuses on investing in securities that have a low beta. These are stocks issued by companies in a sector like consumer goods, food, and utilities. This type of asset tends to avoid wild fluctuations because its line of business is both necessary and consistent. For example, utility companies exert a relative monopoly over their local region and face little competition in their sector.

Low Beta stocks are safer in terms of price when the market is down—they match the market, and don’t wildly plummet while the market is coasting. However, when the market is up, the same logic applies: these stocks gain less than some of their more volatile counterparts.

Some investment strategies actually involving investing in both low and high beta stocks simultaneously. Stocks with a higher beta—which can experience greater price fluctuations—can present opportunities for big gains through short-term trading of these volatility stocks. To offset potential losses, the investor will also buy into stocks with a lower beta and hold onto them for longer periods of time. This statistical arbitrage strategy is referred to as the bet against beta.

How to Reduce Risk in Your Portfolio

Unfortunately, beta is not a catchall indicator that can prevent losing your earnings to risky investments. While beta is a mathematical measure of how volatile a stock is in comparison to the market, it says nothing about other factors, like how a company operates, its debt, or current events that can affect its operations—such as its potential in regard to future earnings.

For example, a company in a stable industry like utilities can be poorly run, on the brink of bankruptcy, and facing a cataclysmic shutdown due to a recent energy-related event—but because it’s historically moved in close tandem with the overall market, it’s beta is low. Doesn’t sound like a good investment, does it?

One way to reduce risk in your portfolio is to diversify your investments. In terms of stocks, this can mean diversifying your portfolio through a range of companies and industries. However, if you want to truly minimize risk, the majority of your portfolio should be invested in stable, established, non-speculative securities, and preferably ones that pay good dividends or offer opportunities for growth.

One of the easiest ways to avoid risk is to invest in mutual funds or ETFs. This type of fund pools money from a number of investors. With a larger amount of money to play with, mutual fund managers can spread it out over a broader range of securities than each individual investor would be able to buy on their own. You can also diversify risk by investing in different types of asset classes. Between stocks, bonds, commodities, real estate, and business ownership, there are a number of vehicles for producing cash flow. A capital asset like a paid-off rental property can even produce free cash flow, unencumbered by expenses (this is every investor’s golden egg).

If your money is diversified, when one of your investments takes a hit, you won’t have to lose all your eggs—you’ve placed them in different baskets. While much ink has been spilled about which type of asset can consistently outperform the others in terms of growth, everyone can agree that at different times one asset outperforms the others; they all carry a degree of historical volatility (even real estate). 

If you do want to pick out which stock comprises your portfolio, another strategy for reducing risk is to invest in established, stable companies—but these companies are stable beyond their beta score. Large blue-chip companies, like those you’ll find in Warren Buffet’s portfolio, have been around for decades. They are well run, well-financed, and have low amounts of debt. Beta says nothing about the degree of competence with which a company is run, although competently-run, long-standing companies usually do have a lower beta score.

Even if you’re trying to avoid too much risk, most financiers would agree that it’s okay to take a small percentage of your portfolio (financial experts such as Benjamin Graham have suggested no more than 5%) and look at cheap stocks to buy. These stocks might be riskier, but they can also provide good returns if they work out. If they don’t, your losses will be marginal.

Is It Smart to Invest in Low Beta Stocks?

While beta is used to analyze risk, it does have some shortcomings. As mentioned, beta is a comparative statistic that says nothing about how a company is run. It’s been described by analysts as a sort of rearview mirror, reflecting what’s behind, but not necessarily what’s ahead (which, by contrast, is very impacted by the degree of managerial competence and current events).

That said, beta can be a good tool for short-game investors looking to minimize risk. For long-term investors, it’s not necessarily that useful.

Moreover, beta is a number that says nothing about a stock’s price movement in terms of whether it’s going up or down. All beta tells you is a stock’s volatility relative to the market. This is especially problematic in light of the fact that investors, especially short-term traders, make their moves based on stock prices. However, in conjunction with other stats that give a more complete picture of a stock and its performance, beta can be a useful tool for assessing a security’s level of risk—for short term investors. Long-term investors will want to get a more complete picture of a company, how it’s run, and its level of debt before making an investment.

Investors should not just look at a stock’s beta, but also examine their own level of risk tolerance. Younger investors building a retirement portfolio can afford to take on more risks. After all, they have decades of investment ahead of them. Older investors nearing retirement want to avoid risk and do what they can to stabilize their portfolio as much as possible since it will become a source of income.

There are many strategies for investing in stocks, and they all depend on the investor's preferred mode of gain. A dividend investing strategy can turn rivulets of pennies into a mighty dividend stream, which is great for investors who want passive income. Day trading is great for investors who are skilled enough to leverage swings in the most volatile stocks at the drop of a hat. Other investors might find themselves somewhere between the long game and the short game, figuring out the best growth stocks to scoop up and sell at a profit weeks or months later.

Institutional investors may make a beta calculation as part of their equity and growth strategy, but it’s not the only tool they leverage for assessing how to respond to systematic risk. They do an in-depth micro and macro analysis of stats like market capitalization and general market volatility. Investors also perform fundamental and financial analysis of a company to consider future growth and dividend yield.

Low Beta Stocks

Beta tells you how risky a stock is by comparing its activity to that of the market. It’s important to combine financial signifiers like beta and even professional analyst ratings with fundamental analysis of a company. Alternatively, you can turn over investment decisions to a money manager.

Assessing the balance between risk and reward as it relates to financial gain is the bread and butter of short-term trading. But if short-term trading is not for you, you may consider other strategies such as searching for dividend-paying stocks, the snowballing equity of which can be rolled back into more dividend stocks. Retail investors can also piggyback invest by mimicking the portfolio of established investors with a track record of success. These strategies can be a much easier way for the average investor to increase their stock market earnings than attempting to leverage stock market beta. However, if you are looking to leverage short positions through day trading or similarly short-term asset growth, beta can be a useful tool for determining the risk of a particular security.


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