This chart illustrates how in periods when high beta stocks struggled, the broader market tended to struggle as well, but to a lesser degree.
Therefore, investors may potentially benefit by implementing strategies that short high beta stocks to better protect against capital loss during market downturns. This approach may improve a client’s overall experience—keeping them invested across market cycles so that portfolio assets can continue to work and the power of compounding can be fully realized over the long term.
Past performance is not indicative of future results. Source: Morningstar. Data from 01/01/00 – 12/31/19.
Beta measures a fund’s sensitivity to market movements. The beta of a market is 1.00 by definition. Q5 is quintile 5 (the highest beta stocks).