If a stock has a beta of 1 means it is likely to move more or less in line with the market as a stock pick in general. A higher beta means that if the market moves back, the action will fall even more, a beta below 1 means that the stock mmarket pick action is not moving as much as the market.
Similarly, if you have a personal beta 2, means that if the market falls 25%, wages will fall 50%.If you think a decline of 25% will have no impact on your finances, but I doubt it-then its beta is zero personal. For a rough measure of personal beta, ask yourself how recent years have affected their wages.
Understanding your personal beta is essential to know the real level of risk in your stock market picks you are assuming and build a properly diversified investment portfolio.
The appropriate level of risk
Once you know its beta, the next step is to find a way to make sure you have the ideal amount of risk in their investments. There are three ways to do this:A question of balance. This is the most basic stock trading for dummies strategy, yet few people follow it: if you have a high personal beta, if the human capital performance tends to fluctuate with the market, then its financial capital, their retirement plan, brokerage account etc., it must invest more conservatively. No matter if you feel that the market will turn up or who is emotionally prepared for the ups and downs of the stock. You should consider that, if markets fall for an extended period, there is a greater chance of losing your job, be unemployed for a long time or have a portfolio of worthless shares. Once accounted for these factors is likely to perceive that your statement is much more vulnerable than I thought.
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