Unlevering Beta to Achieve Financial Peace of Mind
The Johnsons are heavily invested in a tech-focused growth fund recommended several years ago. While it has performed well, they're increasingly concerned about its volatility and the potential impact on their college and retirement goals, especially with college tuition bills looming in the next 5-10 years. They need to understand the true underlying risk of the fund, independent of its debt financing.
Using the Unlevered Beta Calculator, Golden Door Asset was able to isolate the inherent risk of the fund's assets. This revealed that a significant portion of the fund's beta stemmed from its leverage, not the inherent risk of the underlying companies. Armed with this knowledge, the Johnsons diversified $150,000 into a portfolio of lower-leveraged, value-oriented stocks with a lower unlevered beta, providing a more stable foundation for their future.
The Unlevered Beta Calculator required inputting the fund's levered beta, debt-to-equity ratio, and corporate tax rate. These inputs were easily accessible from the fund's prospectus and financial statements.
$30,000 reduced portfolio volatility, increasing confidence in meeting college funding goals and retirement targets.
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