7 Things to Know About Alpha

Published On: 04-Jul-2017

Alpha is the first Greek alphabet, but in Mutual funds and investments, Alpha is the yardstick to which the investment performance of a mutual fund scheme is generally tied with. Alpha denotes the excess returns generated by the fund as against the expected returns from such funds. 

It tends to reflect the outperformance or underperformance of the fund as against the market returns. Here are seven things you must know about Alpha:

01

Alpha is a measure of actual returns against the expected returns

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02

Zero Alpha is not an achievement

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03

Higher Beta does not reflect higher Alpha

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04

Funds generating similar returns may not generate similar Alpha

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05

Positive Alpha does not guarantee future returns

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06

Alpha should be reviewed over long-term

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07

A negative alpha does not necessarily denote underperformance

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