Investment Volatility At a Glance

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When teaching investments in the personal financial literacy course it is paramount to discuss risk. Investment risk, pure risk, economic risk, political risk and various other risk factors need to be addressed. Students need to be made aware of stock/investment volatility as well. One of the best measures of volatility is a stock’s beta. All stocks holder a beta over 1.0 hold more risk and more potential reward than those stocks below 1.0. A stock with a beta of 1.3 is said to be 30% more volatile than the market. That means on a day to market is trading down the losses will be great, but when the market is up gains may occur. For this reason we don’t recommend day trading.

Below let’s examine my three most recent investment purchases:

twtr

Twitter, Inc. is sold on the New York Stock Exchange (NYSE)
http://finance.yahoo.com/q?s=TWTR

I made a purchase of 100 $TWTR shares on March 19th, 2014 for $50.74 per share. As of October 9th, 2014 $TWTR’s price point is at $55.29. This means if I were to sell my shares at the open of the stock market I would have received a 8.63% Rate of Return on my investment. I would hold a net profit of $439.10 after transaction fees.

I make a profit today, but would have occurred losses if I sold shares during May, June or July.

NOTE: Twitter’s Initial Public Offering (IPO) was held on November 6th, 2013, so we have a few weeks before a Beta coefficient is available.

ely

Callaway Golf Co. is sold on the New York Stock Exchange (NYSE)
http://finance.yahoo.com/q?s=ELY&ql=0

I made a purchase of 100 $ELY shares on April 16th, 2014 for $9.38 per share. As of October 9th, 2014 $ELY’s price point is at $6.91. This means if I were to sell my shares at the open of the stock market I would have received a -27.56% Rate of Return on my investment. I would hold a net loss of $262.90 after transaction fees.

I would have sustained a loss from selling at any point since purchasing my shares.

NOTE: Callaway Golf features a Beta coefficient of 1.51 meaning the stock will fluctuate at a rate of 51% more than the market!

ftec

Fidelity MSCI Information Technology Index ETF is traded on the American Stock Exchange (AMEX)
http://finance.yahoo.com/q?s=ftec&ql=1

This ETF is composed of primarily US Tech stocks including Apple, Microsoft, IBM and Google. Some of the stocks involved were too expensive for my taste, so this was my point of entry on them.
http://etfdb.com/etf/FTEC/#holdings

I made a purchase of 100 $FTEC shares on September 11th, 2014 for $29.42 per share. As of October 9th, 2014 $FTEC’s price point is at $29.38. This means if I were to sell my shares at the open of the stock market I would have received a -0.67% Rate of Return on my investment. I would hold a net loss of $19.90 after transaction fees.

I could have sustained a loss or a profit from selling at various points since purchasing my shares.

NOTE: Fidelity MSCI Information Technology Index ETF was first offered on October 21st, 2013, so we have a few days before a Beta coefficient is available.

Please note how in spite of three similar investments being traded there have been drastically different results.

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