Decoding Beta: Measuring Risk in Mutual Fund Investments

Ratin Biswass / 24 Jul 2025/ Categories: DSIJ_Magazine_Web, DSIJMagazine_App, Letters to Editor, MF - Letter to Editor, Mutual Fund

I often come across the term 'Beta' in the context of mutual fund investments

I often come across the term 'Beta' in the context of mutual fund investments. Could you please explain what Beta means and why it is important? - Rachit G.[EasyDNNnews:PaidContentStart]

Editor Responds : Beta is a measure of a mutual fund's volatility or systematic risk compared to the overall market, typically represented by a benchmark index like the Nifty 50. A Beta of 1 indicates the fund moves in line with the market. A Beta greater than 1 means the fund is more volatile, likely to rise or fall more than the market. Conversely, a Beta less than 1 suggests lower volatility and relatively stable performance during market swings. Understanding Beta helps investors assess a fund's risk profile. For example, aggressive investors may prefer high-Beta funds for potential higher returns, while conservative investors may choose low-Beta funds to minimize downside during corrections. However, Beta only measures market-related risk and not company-specific or unsystematic risks. It should be used alongside other metrics like Alpha, Standard Deviation, and Sharpe Ratio for better investment decisions.

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