Page 48 - Intelligent Investing (3)
P. 48
Analyzing Risk & Performance Over Time
Alpha - A performance measuring stick on a risk adjusted basis.
● It helps determine whether or not a fund manager adds value to a fund when
he takes on more risk than the benchmark.
● Alpha can be positive or negative
● Funds with a negative alpha show that performance will suffer if more risk is
taken in the portfolio
Measuring Rate of Return - Usually the 3,5,10 year rates of returns are the best
indicators for performance compared to 1 year (YTD).
