What Is Portfolio Beta? How to Tell If Your Holdings Swing More Than the Market
5 min read
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5 min read
The market drops 10% in a week. You open your app. Does your portfolio drop 10%? Or 15%? Or only 6%?
Portfolio beta is the number that answers this before it happens. It tells you how much your whole portfolio tends to move when the market moves.
This post shows how to read it, how to work it out by hand, and why your own number quietly changes even when you buy and sell nothing.
Beta is a score for how strongly something moves with the market.
"The market" here means a benchmark index, such as IHSG for Indonesian stocks or the S&P 500 for US stocks. We explain why the choice matters in our guide to measuring beta against the right index.
Portfolio beta is the same idea, applied to everything you own at once.
You do not need a spreadsheet full of price history. If you know each holding's beta, the portfolio beta is a weighted average.
A weight is just the share of your money in that holding. Rp40 juta out of Rp100 juta is a weight of 0.4.
This is the standard method. Finance explainers such as SoFi's guide to portfolio beta teach it the same way (we saw this through a search summary, and the formula itself is plain arithmetic you can check below).
Here is a made-up portfolio of Rp100 juta. The stocks and betas are invented for the example. They are NetWort arithmetic, not real securities.
| Holding | Amount | Weight | Beta | Weight × beta |
|---|---|---|---|---|
| Bank stock A | Rp40 juta | 0.40 | 0.9 | 0.36 |
| Growth stock B | Rp30 juta | 0.30 | 1.6 | 0.48 |
| Consumer stock C | Rp20 juta | 0.20 | 0.6 | 0.12 |
| Cash | Rp10 juta | 0.10 | 0.0 | 0.00 |
| Portfolio | Rp100 juta | 1.00 | 0.96 |
Portfolio beta is 0.96. It looks like "the market". But look inside. Most of that number comes from one stock with a beta of 1.6.
If the market falls 10%, this portfolio has tended to fall about 0.96 × 10% = 9.6%. That is about Rp9,6 juta.
Now suppose growth stock B has a great year and grows from Rp30 juta to Rp50 juta. The others stay put. You buy and sell nothing.
| Holding | Amount | Weight | Beta | Weight × beta |
|---|---|---|---|---|
| Bank stock A | Rp40 juta | 0.33 | 0.9 | 0.30 |
| Growth stock B | Rp50 juta | 0.42 | 1.6 | 0.67 |
| Consumer stock C | Rp20 juta | 0.17 | 0.6 | 0.10 |
| Cash | Rp10 juta | 0.08 | 0.0 | 0.00 |
| Portfolio | Rp120 juta | 1.00 | 1.07 |
Beta rose from 0.96 to 1.07. Same stocks. The winner just became a bigger slice.
Now a 10% market fall has tended to mean about a 10,7% drop on Rp120 juta, which is about Rp12,8 juta. Your portfolio became more sensitive to the market only because one holding did well.
(The weights in the table are rounded. The totals use the exact figures.)
Beta is useful. It is also easy to over-trust. Four limits to remember:
How well the benchmark explains your holdings is its own question, covered in R-squared explained.
NetWort's Portfolio Health card shows your portfolio beta over the past three years. It works from your portfolio's daily returns and the benchmark's, matched by date.
The benchmark is picked from your holdings. If most of your tickers are Indonesian (ending in .JK), it uses IHSG. If most are US stocks, it uses the S&P 500. In a mixed portfolio, it uses the market with the most tickers.
You can also look at a single holding's beta on its asset page. For example, open Bank Central Asia (BBCA) and compare it with a stock you own.
Open the NetWort Dashboard and find the beta number in your Portfolio Health card. Then ask one question: if the market fell 10% next week, would a loss of that size let you sleep?