Beta

Beta measures an investment's sensitivity to market movements.

Interpretation:

• Beta = 1.0: the share moves exactly like the market. Market +10% → share +10%
• Beta = 1.5: the share moves 50% more. Market +10% → share +15%. Market −10% → share −15%
• Beta = 0.5: the share moves half as much. Market +10% → share +5%
• Beta = 0: no correlation with the market (e.g. gold)
• Beta 0: the share moves in the opposite direction to the market (very rare)

Typical betas:

• NVIDIA: beta ~1.7 (highly volatile, reacts disproportionately)
• Apple: beta ~1.2 (somewhat more volatile than the market)
• Nestlé: beta ~0.6 (defensive, less fluctuation)
• Utilities (E.ON): beta ~0.5 (very defensive)

For private investors: an MSCI World ETF by definition has a beta of approx. 1.0 – you get exactly the market's fluctuation. If you want less fluctuation, add overnight money (lowers the portfolio beta).