Buy, sell, buy, sell. Well, not all of us are into the whole "buy low, sell high" idea when it comes to investing in stocks. Sometimes buying stocks and hanging onto them provides a sense of financial security.
Of course, if you ever need your money, its a good thing to be able to pull it out at any time, instead of having to wait.
For instance, if you bought 1000 shares of something for $8 a share, and now it is worth $7. You'd lose $1,000 if you had to pull it out. The other option is having to wait until the stock rebounds, which could take months!
So the smart thing to do is pay attention to stock's "beta" score.
This is just one tool to take into consideration when buying a stock, though. However, beta is a very important one.
The higher the beta number, the more of a risk you're taking. Obviously, markets can be hard to predict.
A government money bond or money in a savings account would have a beta score of 0. Because you're obviously going to get the return, or at least your money back, no matter what the financial markets look like.
Once you start moving into the higher beta numbers, you will find that the numbers start to fluctuate. The market itself has a beta score of 1. Because that is the constant. Then you start moving into multiples based on the stocks themselves. A stock with a beta score of two moves with the market, but at twice the amount. Lets say the DOW is down 3%, your stock with a beta score of 2 will go down roughly 6%. Make sense? a beta score of 3 would be 9%, and so on and so forth. Theoretically beta numbers are infinite, but most stocks fall into the 0.5-4 range.
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