Tag Archives: low-beta stocks

Sector Watch: Low-Beta Stocks

Financial theory suggests that risk and return go hand-in-hand:

Small company stocks tend to be riskier and outperform large company stocks. Long-term bonds tend to be riskier and outperform short-term bonds. Corporate bonds tend to be riskier than Treasury bonds (with comparable terms) and outperform Treasuries over time.

However, there is one group of stocks that has consistently defied this risk/return relationship: Low-beta stocks. A low-beta strategy involves selecting stocks that have a lower-than-average beta value. (Beta is a measure of the stocks’ volatility and adding low-beta stocks to your portfolio can help investors build a diversified portfolio.) The good news for investors here is that Continue reading

Risk, Return and Low Beta Stocks

My article in last week’s Advisor Perspectives titled, “The Greatest Anomaly in Finance: Understanding and Exploiting the Outperformance of Low-Beta Stocks,” explores what the findings of a 2011 paper published in the Financial Analysts Journal called “the greatest anomaly in finance.”  The issue at hand is one that I have written about in a number of articles including “Why Low Beta Strategies are Worth Another Look,” and one that I’d like to explore further in today’s blog post.

Financial theory suggests that risk and return go hand-in-hand. While higher-return assets do tend to be riskier than lower-return assets, there is a notable exception. Continue reading

It’s Time to Revisit Our Financial Resolutions

Did you make a financial resolution when the clock struck midnight on New Year’s Eve?

Don’t we all?

Believe it or not, January 1, 2011 was more than eight  months ago—and needless to say, a lot has happened since we all rang in the New Year.  That’s why right now might be the perfect time to revisit those financial resolutions.

What a Year …

Well-known companies like LinkedIn (LNKD), Pandora (P), and Zillow (Z) went public. The economy started to rebound only to lose its footing. Washington debated and debated and then finally voted on the debt ceiling. Then Standard and Poor’s downgraded the U.S. credit rating.

So what’s an investor to do in these uncertain times? Continue reading