Beta

Beta measures how much an investment moves relative to the overall market (usually S&P 500). Beta of 1.0 means the investment moves exactly with the market.

Beta interpretations:

• 1.0: Moves in sync with market (most index funds)
• 1.5: 50% more volatile (if market drops 10%, investment drops 15%)
• 0.5: 50% less volatile (if market drops 10%, investment drops 5%)
• Negative: Moves opposite to market (rare—some hedge strategies)

High beta = high risk AND high potential return Low beta = lower risk AND lower potential return

Tech stocks often have beta of 1.3-1.7 (more volatile than market). Utility stocks have beta of 0.5-0.8 (less volatile). Gold sometimes has negative beta (rises when stocks fall).

Beta measures risk, not returns. A stock can have high beta and lose money if it's fundamentally flawed. Use beta to understand volatility, not to predict performance.