Advertisement
Alpha is a way of describing an investment portfolio’s performance. Learn more with the MoneySense Glossary.
Alpha refers to an investment return greater than the aggregate return of the market in which the investment trades. Actively managed funds aim to beat the market, adding alpha with the help of skillful investment decisions. In contrast, passive index funds are designed to deliver the market return only, with no alpha.
If your portfolio underperforms the market, your alpha is negative. If you exactly match the market return, it’s zero. Positive alpha results when your investments outperform the market.
Example: “Warren Buffett, considered one of the greatest investors of all time, achieved annualized results of 19.8% from 1965 to 2023. Over the same period, the S&P 500 increased on average 10.1% per year. Thus, Buffett achieved almost double the market return, adding alpha of 9.7% per year on average.”
Share this article Share on Facebook Share on Twitter Share on Linkedin Share on Reddit Share on Email
To have liquidity and reduce taxes, Canadians can move money between registered accounts. But what are the tax, contribution...
The apparel retailer’s profit jumped 72% in Q3, as its e-commerce and U.S. net revenue spiked.
Sponsored By
Simplii Financial
We have everything you need to know about tax credits, changes and deadlines, and more. Get the info you...
The increase to the capital gains inclusion rate is going ahead—at least for now, says Canada’s Finance Department.
Which ETFs should you invest in? Which ones best suit your risk tolerance? What about personal ethics? Check out...
A tax-free savings account inherited from a spouse is subject to special treatment. Here’s how it may impact the...
For 2025, experts predict economic growth, but slower gains and more volatility.
Find the best GIC rates in Canada. Plus, everything you need to know about how they work.
