Roaming Returns

009 - Limit Your Downside Risk With Low Beta Stocks

• Tim & Carmela • Episode 9

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If down days in the market send you into panic mode, you need to implement a beta strategy. Stocks with a beta close to 1 are much less volatile than the market, which limits your downside.

Low beta's also decrease the upside. But that's okay for dividend stocks, because of reinvesting and compounding.

CALM is our favorite and ridiculously low beta stocks. Who would've thought that eggs could be so exciting? 

Of course there's other ways to limit your downside like 


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Ticker metrics change as markets and companies change, so always do your own research. The content in this podcast is based on personal experience and is for educational purposes, not financial advice. See full disclaimer here.

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Welcome to Roaming Returns, a podcast about generating a passive income through investing so that you don't have to wait 'till retirement to live your passions. 

If down days in the stock market scares the bejesus out of you, you need to know about beta. So stay tuned because this is an amazing tactic to mitigate some of that. downside risk. Here we go. beta, beta, beta, beta, beta, beta, beta, beta, two z. Oh my god responses EP No. So beta is another really important Oh, we're
back. Okay, I'm sorry, I was just staring off into space. Oh, yeah.
Um, I jumped the gun. I'm so bad with introductions. I'm
sorry, guy who's like, waiting for the introduction just to gathering my thoughts about beta life and to Zekey and such. She's like, Oh, we're live. Oh, beta, my bad Beta. Beta is super important if you don't have the stomach for risk. Yeah.
So beta is
it's the measure of an investment sensitivity to market movements. It compares the price volatility of an investment to that of the benchmark index.
So what let's break that down into simplistic terms because that's it sounds like some nerd right that nerd you call me a nerd nerd. fighting words. Nerd. Basically what beta is, is, on any given day, the s&p goes up 1% A beta greater than one means that the stocks gonna go up more than 1%. Generally, a beta less than one means it's not going to go up the 1%. So
basically, anything above one means it's more volatile than the market.
Anything less than one means it doesn't really move in lockstep with the market as much
they can go the opposite direction or it can just stay flat. So like I said, it says fu market we don't consider risk
adverse. You want a low beta, but then there's such a thing as too low beta where they stopped just as whatever the hell it wants. Well, from
a growth perspective, that doesn't make sense, but if it's paying a good dividend, I think a flatline price makes more sense actually than going up price.
I concur with that assessment. Yeah, a
really good example of that is the egg company chicken eggs, chicken eggs. I'm just flabbergasted. This is a thing. Tell us about Calm, calm.
It is thick. It's calm marine or something like that. It's basically I don't know the name of it. I just know it's ticker ca LM calm and it is x everything X keto calm, like it has has the free range eggs. It has the no hormone eggs. It has the regular where you pack them all into a pan eggs, but it's all about eggs. And it pays it has a variable interest or I'm sorry, variable dividend it pays anywhere between I want to say four and 15% any given quarter, but it's beta is point 03. That means super like literally just goes into like a freaking straight I guess a flatline
and you were just telling me somebody was ripping on that company. They were and I was like, I
don't understand what they're saying. Because I got a I got intuited on a dip. I was like, Well, that seems pretty low. That seems pretty low for this company. So I got into it. And that MF was shot straight up. We're up like 10% and the stock that has this point 03 beta.
Yeah, that's insane. That's absolutely insane. And we're getting dividend compounding on top of that. So
probably should pay attention when I give you tickers. Just saying not not toot my own horn but
oh my god, you're out of control. I'm the kind of person that I need evidence to support something before I can actually like, have it as my decision making criteria. Tim just lives in intuition land and it's taken me probably like how long we've been together eight years to really feel comfortable with
YOLO man YOLO YOLO I just pulled the yellow with all those ETFs What are you talking about?
That one's different that is really different but at the same time, you have to understand the way that Tim thinks he it doesn't seem like he has any clue what the heck he's doing. If you know anything about personality types, Tim is an INTJ everybody loves these guys online. They
all think the INTJ is is like you're not you're not you're not you're not you're on here talking to you're not an INTJ
but basically the way INTJ is brain works. They have a really deep connection with their unconscious. So they collect data in their unconscious and then they come to these like amazing Oracle decisions or knowings of the future basically, and I were like on point, majority of the time so for me meeting concrete data, it's been an adjustment to just rely very difficult
trying to explain to someone that needs facts and figures that I have a gut feeling and the
crazy part of and then the worst part is like I think his persona type gets really frustrated because it's to Ziqi Ziggy, they can't explain it to the people don't take them credible, but they were right in the initial. So it's like I I've kind of just learned to let him YOLO with my money to be honest, like, well, a past side from the near death experience and absolutely risk implosions that we've done before but that was before he was using this strategy and really really got a handle on things but now I swear to God like every one that he's just like, this one looks like a good one you even did it the other day with with an icon like you know, it's like I should get back into that and then it like rally like I'm not even it was like half a day later it rallied like some ridiculous percent
I think six or 7% Since I since I should get into that again and I bought more more shares. So I'll work down in it but I keep buying shares when it dips and then it keeps going up and like it's working its way out.
Or working its way out with reinvestments and buying it lowered awake average in our buying price.
We've lost like six we've lost like $6,000 in it, like a little less than $6,000 but we've made almost 3500 in dividends so we're only really down 2500 and get the great company they own like everything they have like 18 Different subsidiary companies book that
actually put icon up there with Buffett and I actually think based on what I've looked into with Icahn, that it's probably a better company than Berkshire Hathaway. So for whatever that's worth Berkshire
is asked if anyone owns that. I'm sorry. You probably shouldn't listen to me. I really know it's like Apple to me. Yeah, I'm
not huge fans of that one either.
Although Apple API does have a ETF where you can make money on it was in the newsletter, but China doesn't matter. It's big do covered calls like I really frickin doesn't matter. The price may go down a little bit, but like you're still making, I think the last dividend was 17%. So Apple pays point, I think point 2% So thanks. You haven't done that yet. Some just insulting thing. It's like we'll give you four cents for owning a share. Thank you. We're
not big fans of the blue chips, especially the blue chips. With like next to no dividends it's like really good.
Apple has won a Tesla doesn't pay a dividend Tesla TSL why paid like 30% just I am.
I thought we're waiting for three months.
We are I didn't say anything. You did not hear anything, not
the droids you're looking for. Wait
until I talk about the ETFs just disregard what I said. APL why TSI why? That's beta beta is important. I'm telling like the
we have anything else to say about beta. You.
You have to take a conscious Look at yourself. And determine what your risk tolerance is. If you have a low risk tolerance you want to get below one betas like for sure for sure. It doesn't always work that way. But they generally have like a five year beta which means they go back five years and they measure like what the stocks closing price compared to the s&p or the NASDAQ whichever ones closing price and they figure it out like that. And so if it's below one, that means the majority of the time it's less volatile. And the reason that you want that is not so much the upside mean the upside is it could be hampered by the low beta. I'm not gonna say it will but it could but it's for the downside the downside like say like the other day I went, that came out that China is going to ban the iPhone Apple's shares just tanked. And if you didn't like Apple because it has a pretty high beta you wouldn't be an apple and if you'd be in a fund that has like a point five beta and owns apple with a closed ended fund and you wouldn't have lost like the 12% just saying it's a downside guarantee. Yeah,
so that's a strategy I
prefer. I prefer using beta strategies more than stop losses. Yeah,
actually, that's a great that's a great segue stop losses. I think we're probably going to do a whole episode on really nitty gritty of limit trading, stop loss trade, and the dividend that bid ask spreads and all that I know we hinted at it at a couple other episodes, but we'll actually do one so that if you're actually looking for that you'll be able to find it. By no
I go by pretty sure like 75% of the subscriptions that I subscribe to they recommend stop losses and I refuse no
I 100% agree with you with what I know stop losses are just bad you do. Like they're literally just setting you up for failure. I never thought about doing beta as an alternative thing that makes a lot of freaking sense actually, you limit your downside. I mean, another way to basically guarantee or not guarantee but um, limit your price volatility was what we just talked about preferred shares
for shares, bonds and CDs. They generally don't and they don't generally not but you can get some like 1011 12% bonds out there that are just at the bottom if not in the junk bond at the bottom of quality bonds the top a junk bond you get like 1011 12% bonds, like BBB
or C BBB BBB
Yeah, from what I read the very bottom of the call. Yeah, yeah, from
what I read as long as you're in the B range, any of the B's. I think the funds and hedge funds and stuff can't buy anything outside the A category. They have too many like limits and restrictions. So a lot more of the opportunities and like ability to make higher yields and the B's anything below that. It's like junk too much risk unless you just like gambling and wasting money by example there's
a GM bond they pay 7% You know, that's they're not going bankrupt. Now government rescue them if it comes to that, so you're getting your 7% Plus it's i i do believe that 12% discount right now. So you literally are getting my at least at least 19% Cocoa
beta of one. So now I don't know what the beta is. I don't even think bonds have I don't
have beta but I can tell you if they did it would be like point two, five or ish. Around there. 25
so super low. So what which types of things actually have a beta? Is it everything that's basically a stock
stocks and funds and you separate sure shares don't have a beta that don't but you kind of can ascertain what their beta will be buy a few get into a preferred share, look at the parent company's beta and then just cut it in half because prefers don't move as much as common shares.
Okey dokey.
So cool. Okay, are we done? We have to say about beta. I got nothing else for this guy. I'm done with this guy.
Oh my god. My cousin Vinnie was such a good movie.
So we got about beta. So what did
he say? He said, I ain't got no more use for this guy. Alright guys, if you found this episode helpful, enlightening, entertaining, entertaining. If you found it informative please go on to any one of the oh my gosh, I'm terrible. This platforms on any of the platforms that you watch this on? Listen to it. Listen to it. No, they already obviously listen. Watching
it. He'll watch the podcast
semantics I have the words wrong. Stop crucifying me.
Even if I got a podcast or they're sitting there talking. I'm like, I'm not watching this.
But if you could go on to any of the podcast platforms that you listen on, leave a review that will help this go up in the algorithm ranking so that other people can actually find it if they're if this is something that they're looking for. And we're just looking to help other people get informed investing.
Good old road. Wait, we're on the road. I'm in a good mood you guys are asked.
Alright guys, thank you to the next episode.