Importance of Stock Beta Value

Beta value of a stock is the measurement of the volatility of a stock in comparison to the volatility of the market. It is a simple and very useful indicator that all traders and investors should be aware of. Calculation of beta value of stocks is essential with many trading/investing strategies especially with Capital Asset Pricing Model (CAPM), which describes how much risk that one can take to get a desirable return or vice versa.

Many financial sites, broker sites and trading platforms offer real-time and daily beta value of stocks. When calculating the beta value, the volatility of the market is taken as 1 and the beta of stock is calculated as how much the stock price moved in comparison to this market volatility. The value can take one of the following forms.

Negative beta: This is an interesting but rare condition where the price of the stock moves in reverse direction to the market movement. Usually no stock has prolonged negative beta value as most (all) them move with the market.

Zero beta: This is another rarity, where the price of stock stays same over time irrespective of market movement. This can sometimes happen in sideways moving markets, where no major economic/industry/company news is coming up.

Beta less than one: This happens when the stock price moves less in comparison of market. Many blue-chip and large-cap company stocks have beta value less than one, which make them qualify for low-risk investments. But these stocks tend to offer low-returns; and are not so suitable for short-term trading.

Beta of one: This happens when the stock price movement is same as that of market. This is true for many index-linked stocks and funds.

Beta greater than one: Beta exceeds one when the stock price movement surpass market movement. Many fast growing, mid and small-cap company stocks have beta higher than one. These stocks tend to offer better return for high-risk taken, but many of them are less suitable for long-term investing. Remember, very high beta levels may indicate low liquidity causing increase in volatility.

Knowledge of beta value is essential from a trader’s perspective as many experts believe that about 70 percent of stock price movements are with respect to market changes. In general it is believed that investing in instruments with high beta is good in rising markets and investing in low beta instruments is good in falling markets.

Advantages of beta value includes: simplicity in calculation, easy to apply and helpful in finding right trading instruments. Disadvantages of beta value includes: as it is based on historical data there is no guarantee of future returns, not applicable for newly issued stocks, does not distinguish bearish and bullish trends and it do not consider the value of the instrument.



Source by NobleTrading

What is the Most Profitable Business Online?

That is the million dollar question for most looking to start an online business, isn’t it?  After all the reason for doing a business is to make a profit.  My thoughts on this topic come from several discussions with top earners in this industry and personal experiences online.  The intent here is to open you up to ideas that are less mainstream and more powerful in achieving results.  So, what is the most profitable business online?  It’s not what you might think.

The answer to that question has one main component that the majority seems to overlook…something you have a passion for.  I’m sure that didn’t cross your mind at first, did it?  A business is a business and must be treated as such in order to create profits.  If your online business doesn’t come from a deep passion, interest, or desire odds are you won’t commit to it is a big enough way.  Makes sense, right?  If you love what you’re doing you will devote everything to the end result.  This passion will take you through good times and bad, will attract customers in everything you do to share the business and ultimately bring the most profit.

A secondary, but highly important component is the income stream.  The philosophy here is it takes the same process and effort to sell a low dollar item as it does a high dollar item.  Larger ticket items tend to have a larger margin and therefore a higher percentage in the profit column.  Another part of online business profit comes from residuals and additional return sales from your customer base.  Anytime an ongoing membership fee is collected there is room for ongoing collections of income from your customers.  This is a smaller amount, but will grow over time with increased customer base to provide a consistent income.  Return sales come through consistent customer contact and providing additional products/services that suit your customer’s interests.  It is much easier to earn from a current customer than finding and selling to a new one.

The last point I recommend is strictly for ease of entry, use, and long-term growth as an online business owner.  This industry reinvents itself with continuous change, advancement, and at break neck speed.  To combat those factors it pays to find a proven online system that you can tailor to your business.  I’m talking about a system that was built by professional online marketers to handle your sales, order processing, customer follow up, continuous training and fulltime support.  The online business world is fairly new and most don’t have all the skills to handle every aspect of this type of business.  However, you don’t need to when you choose this route.

I hope these ideas were helpful in finding what is the most profitable online business?  I welcome your comments and questions into this and any other topic I’ve written about.



Source by karl keller