If an investment has a beta of 0.9, how does it respond to market movements?

When an investment has a beta of 0.9, it indicates that the investment is less sensitive to market movements compared to the overall market, which has a beta of 1. A beta value of 0.9 suggests that for every 1% change in the market's return, the investment's return is expected to change by only 0.9%. This reflects a tendency for the investment to experience smaller fluctuations in value relative to the market's movements.

This lower sensitivity implies that the investment could provide a more stable return, making it a potentially safer choice for conservative investors who are looking to minimize the impact of market volatility on their portfolios. The investment is still somewhat correlated with the market but does not rise or fall as dramatically as the market does, which can help reduce overall portfolio risk.

Understanding the implications of beta allows investors to better assess the risk profile of their portfolios and make informed decisions based on their individual risk tolerance and investment goals.