Continuing where we left off, lets look at a small portion of the betas
A beta of "1" means that the market affects the stock about a 1:1 ratio. For example, BAT and CIMB have a beta that is close to 1. This means if the market is up 1 percent, these stocks will likely follow 1 percent and vice versa to the downside.
Hlbank has the lowest beta of 0.227 followed by Ambank with .646. This means that they are not as affected by the market for some reason or another. Market movements don't move the stock as much.
The higher betas stocks like Genting Malaysia with 1.676 means if the market is up or down 1 percent, the stock will probably be up or down 1.8 percent. The stock movements are amplified by the market's movement.
So now we have had a run down of the betas how do we play defense? I'm sure many of you are thinking, I own 20 stocks. Which one do I sell when the time is right? Geez. I can't sell all of them.
We start with looking at what stocks we own and determine the beta. If the stock has a high beta, you would want to lighten up on those stocks. If the market would turn lower, the downside move could be strong and swift, thus affect your portfolio value. By the same regard, high beta stocks can amplify returns and market bottoms.
So, if prices are getting to out of line to the top side, Look at unloading the high beta stocks first! But defense involves more than just selling betas. We'll take a look further at what stocks you should keep and sell in the next post.
A beta of "1" means that the market affects the stock about a 1:1 ratio. For example, BAT and CIMB have a beta that is close to 1. This means if the market is up 1 percent, these stocks will likely follow 1 percent and vice versa to the downside.
Hlbank has the lowest beta of 0.227 followed by Ambank with .646. This means that they are not as affected by the market for some reason or another. Market movements don't move the stock as much.
The higher betas stocks like Genting Malaysia with 1.676 means if the market is up or down 1 percent, the stock will probably be up or down 1.8 percent. The stock movements are amplified by the market's movement.
So now we have had a run down of the betas how do we play defense? I'm sure many of you are thinking, I own 20 stocks. Which one do I sell when the time is right? Geez. I can't sell all of them.
We start with looking at what stocks we own and determine the beta. If the stock has a high beta, you would want to lighten up on those stocks. If the market would turn lower, the downside move could be strong and swift, thus affect your portfolio value. By the same regard, high beta stocks can amplify returns and market bottoms.
So, if prices are getting to out of line to the top side, Look at unloading the high beta stocks first! But defense involves more than just selling betas. We'll take a look further at what stocks you should keep and sell in the next post.
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