How you can assess your investment portfolio’s risk using beta.

The Story

Have you ever wondered why your portfolio seems to dip more than the Nifty 50? As of today, the Nifty 50 is down about 8% from its all-time high. Yet, chances are, your portfolio might have fallen by an even larger percentage.

And if you observe, different sectors have also declined by varying degrees during the recent market downturn.

Why does that happen?

Well, it has something to do with Beta. It’s simple and easier to understand than you think.

The Beta

Beta in finance is a measure of how much an investment portfolio moves compared to the overall market. Think of it as the ‘risk meter’ that tells you how sensitive a stock (or mutual fund) is to market movements.

De-Financing Beta

If the Beta of your mutual fund is 1 means the fund or a stock moves in line with the market. If the market goes up 10%, the fund also goes up 10%.

Similarly, if Beta is greater than 1, say 1.2


It indicates that the fund is more volatile than the market, and it moves 1.2% for every 1% move in the market.

If the market goes up by 10%, the fund would move up by 12%. Likewise, if the market goes down by 10%, the fund moves down by 12%.

Beta less than 1 means the fund is less volatile than the market. For example, if the beta of your mutual fund is 0.8, it indicates that for every 1% move in the market; the fund moves 0.8%. If the market goes down by 10%, the fund moves down by 8% and vice versa.

The use case of Beta?

It helps you decide if a mutual fund or a stock fits your risk appetite.

Here’s a beta of popular indices. In 2024, many fund houses came up with index funds based on these themes, drawing a lot of investors’ attention.

Sectors like energy, which are highly sensitive to global shocks, have a higher beta of 1.45 compared to FMCG—a sector tied to our daily essentials.

Usually, sectors more sensitive to economic cycles tend to have higher betas.

Wondering how to check the beta of mutual funds?

It’s simple! Just type the name of your fund scheme followed by ‘beta’ into Google. You’ll find it on platforms like MoneyControl or Economic Times, usually under the risk metrics section.

To Conclude

Whether you’re aiming for stability with low-beta funds or seeking higher returns (and higher risks) with high-beta stocks, beta empowers you to make informed decisions.

So, the next time your portfolio sways more than the market, you’ll know exactly why—and what to do about it.