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Finance GlossaryBeta Stocks
Beta Stocks
Definition of Beta Stocks
Beta of stocks measures the risk that the shares carry compared to the broader market. Theoretically, the market is said to have a default Beta of 1. As a result, Beta stocks can be of four types:
- High Beta Stocks : typically having a Beta value of more than 1, these stocks are known to be high-risk, high-reward investments
- Low Beta Stocks : typically having a Beta value of less than 1, these stocks are known to be low-risk, low-reward investments
- Negative Beta Stocks : typically having a Beta value of less than zero, these stocks are known to have an inverse correlation with the market
- Same as the market : typically having a Beta that’s equal to 1, these stocks are known to share characteristics with the market
Related Terms
Dividend Reinvestment Plan (DRIP)
A Dividend Reinvestment Plan is a feature where an investor can reinvest the dividends they earn to buy additional shares or units of a mutual fund, either fractional or whole.
Stocks and mutual funds offer Dividend Reinvestment Plans. As a result of reinvesting dividends, investors can add more money to their existing holdings for better compounding. That said, dividends that are reinvested are taxable.
Stocks and mutual funds offer Dividend Reinvestment Plans. As a result of reinvesting dividends, investors can add more money to their existing holdings for better compounding. That said, dividends that are reinvested are taxable.
Adjusted Futures Price
An adjusted futures price shows the cost of purchasing, financing, and delivering the underlying assets of a futures contract.
The adjusted futures price is calculated by multiplying the price of the underlying asset by the number of units to be delivered (known as the conversion factor).
The adjusted futures price is calculated by multiplying the price of the underlying asset by the number of units to be delivered (known as the conversion factor).
Differential Voting Rights
Differential Voting Rights or DVRs are special types of shares that carry more or less voting rights, depending on the issuing company. For example, a DVR share that carries less than usual voting rights may generate relatively high dividends.
A publicly traded company that wants to issue DVR shares must go through a postal ballot. There are other caveats as well. But broadly speaking, a company must have a healthy finanical track record if they want to issue DVR shares.
A publicly traded company that wants to issue DVR shares must go through a postal ballot. There are other caveats as well. But broadly speaking, a company must have a healthy finanical track record if they want to issue DVR shares.
Capped Style Option
Capital is the total amount of money that a trader can use to buy and sell securities. There are variations of the term, the most common one is “starting capital”. This is the amount of money a trader starts their journey with.
Demat Account
A Dematerialized or Demat account is used to store shares and ETFs in the electronic format. It is linked to a bank account and is necessary for trading or investing that involves delivery, that is, where the asset is held overnight.
Flipping
Flipping is the act of buying and selling an asset quickly to make a profit. The term is commonly used in real estate where an investor buys a property and sells it within a short span of time, say days or weeks, to make a quick buck.
The real estate investor may flip the property after making small improvements to it, thereby increasing the chance of making potentially lucrative returns. Flipping is also a term used to describe an investor’s actions during an IPO.
For example, let’s assume Mr. Apple invests in the IPO of Juice & Co. and intends to sell the shares days or weeks after the company’s stock is available on the secondary market.
The stock soars on the first day of listing, right at the opening bell, and Mr. Apple sells. In such a case, Mr. Apple will have earned potential profits by flipping IPO shares.
The real estate investor may flip the property after making small improvements to it, thereby increasing the chance of making potentially lucrative returns. Flipping is also a term used to describe an investor’s actions during an IPO.
For example, let’s assume Mr. Apple invests in the IPO of Juice & Co. and intends to sell the shares days or weeks after the company’s stock is available on the secondary market.
The stock soars on the first day of listing, right at the opening bell, and Mr. Apple sells. In such a case, Mr. Apple will have earned potential profits by flipping IPO shares.
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