How to Create a Diversified Stock Portfolio

Harness the power of Beta and the Capital Asset Pricing Model.

Photo by Austin Distel on Unsplash

The surest way to become wealthy is to save money and invest it in the stock market. The stock market has been the greatest wealth generator of the past century.

Here are two tools you should be familiar with in order to reduce risk and increase your returns through diversification and portfolio theory.

Beta and the Capital Asset Pricing Model are also used to calculate the cost of equity. This is a method to derive a meaningful discount rate for discounting the future cash flows and valuing income-producing assets.

Attention Entrepreneurs

These tools can be used to create a rational valuation for a startup seeking early stage equity financing

Let’s take a look.

Beta and CAPM

Every company has different products and services, customers and competitors, technologies, and employees. These unique…