The term ‘High Beta Stocks’, sounds exciting and interesting – at least in investor and trader community. But how should Beta be interpreted, what are high beta stocks and what are the advantages and disadvantages of investing? In this article we will delve into these questions.
What are High Beta Stocks?
“Beta” tends to measure the price of a stock in a market with respect to the volatility of the market and also specifies the risks associated with that particular stock. High Beta stocks are those stocks that possess more market risk. They are highly volatile, and they outperform in the stock market. If the stock beta value is of magnitude 1, it signifies that the stock is of moderate volatility. A beta value less than 1 signifies low risk & low volatility. Thus, these stocks are those which have a Beta value of more than 1.
If you are an investor who can tolerate risks and market volatility, then High Beta stocks would be ideal for you to invest in.
Advantages of Investing
1. Higher Returns
High Beta stocks tend to provide high returns on the rates of equity the S&P 500 or Nifty 500. These stocks can substantially increase your wealth, and therefore, if you are aiming for wealth accumulation through stock trading, High Beta stocks can help you achieve the same.
2. Shield Against Inflation
The rise in inflation can exponentially increase losses in stock trading. However, High Beta stocks generally perform better during high inflation. Further, high inflation is the most suitable for growth-oriented companies as they can increase their prices conveniently. Thus, those who have invested in those companies tend to receive more returns even during inflation.
Disadvantages of Investing
1. High Risk
High Beta stocks are highly volatile to market fluctuations. They tend to show low stability, and so, are risky choices for investments. If the market does not do well someday, these stocks would be losing the most value, and therefore, cause huge financial losses to the investors.
2. Higher Expenses
High Beta stocks generally seek higher investments. They can turnover and disbalance the entire investor portfolio. If you are an investor with limited funds, then it is suggested that you should invest in multiple stocks rather than putting all your money in a single High Beta Stock.
List of Few Most Active High Beta Stocks in Nifty 50
| Company Name | LTP * as of 9th June ’22 |
| Axis Bank | ₹ 661 |
| Adani Ports & SEZ | ₹ 736 |
| Adani Power | ₹ 288 |
| Ashok Leyland | ₹ 138 |
| Bank of Baroda | ₹ 105 |
| Bank of India | ₹ 46.4 |
| CG Power | ₹ 177 |
| Canara Bank | ₹ 207 |
| Century Textiles | ₹ 812 |
| DLF | ₹ 325 |
| GMR Infrastructure | ₹ 36.5 |
| Hindalco Industries | ₹ 400 |
| HDFC | ₹ 400 |
| ICICI Bank | ₹ 733 |
| IDBI Bank | ₹ 37.4 |
| India Cements | ₹ 164 |
| JSW Energy | ₹ 243 |
| Jain Irrigation | ₹ 35.8 |
| Jindal Steel | ₹ 369 |
| Karnataka Bank | ₹ 65.8 |
| Larsen & Toubro | ₹ 1,596 |
| LIC Housing Finance | ₹ 341 |
| Motherson Sumi Systems | ₹ 124 |
| State Bank of India | ₹ 467 |
| Steel Authority of India | ₹ 75.0 |
| Tata Motors | ₹ 429 |
| Tata Steel | ₹ 1,045 |
| Ujjivan Financial Services | ₹ 139 |
| Vodafone Idea | ₹ 9.22 |
To Sum Up
If you wish to accumulate wealth, then High Beta stocks can be the ideal trading and investing. However, you should always keep in mind that these stocks are highly volatile and carry with them higher risks. Thus, you should always analyse the market movement before investing in these stocks and also keep yourself involved with the market movement after the investment.
You can also read – Trade 2 Trade Stocks – What are T2T Stocks?
Happy Trading 📈
Disclaimer: This blog is not to be construed as investment advice. Trading and investing in the securities market carries risk. Please do your own due diligence or consult a trained financial professional before investing.
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