Question

you have a $50,000 portfolio consisting of intel, ge and con edison. you put $20,000 in intel, $12,000 in ge and the rest in con edison. intel, ge and con edison have betas of 1.3, 1.0 and 0.8 respectively. what is your portfolio beta?

Answer 1

Portfolio Beta = (20/50)(1.3)+(12/50)(1.0)+(18/50)(0.8)=1.048

Why should I be concerned with my portfolio's beta?

A portfolio's beta reveals how much more volatility it has relative to the market. The danger of your existing investments is represented by volatility. The more volatile your portfolio is (greater beta), the more dramatically it will fluctuate and record a loss in the event of a panic sale. 

How do you define a high portfolio beta?

A stock with a beta above 1.0 fluctuates more than the market over time. A stock's beta is a little less than 1.0 if it fluctuates less than the market. Low-beta stocks carry less risk but have lower potential returns whereas high-beta stocks are considered to carry greater risk but have larger potential returns.

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