Importance of Alpha

The 4 reasons why you should care about Alpha to become a better investor 💸

As a quick reminder 💡Alpha = excess return on an investment compared to its benchmark, which is often the S&P 500

There’s a lot of metrics and money numbers out there, but today we’ll learn why Alpha is so important 🤩

1️⃣ A stock's alpha can be a great way to compare how a company has performed relative to its peers or competitor stocks 🥊

2️⃣ Alpha can help investors identify stocks, industries or funds that are outperforming the market

3️⃣ Alpha can also help investors identify undervalued stocks that have the potential for higher returns.

4️⃣ And finally, Alpha can be used to help diversify a portfolio by identifying stocks or funds that perform differently than the market.

Now you know the 4 core benefits of Alpha and why investors cherish this money number 😎

Test your knowledge

What can Alpha help investors do?

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What is Alpha?

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Alpha often shows the difference in return between:

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What's next?

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Positive vs. Negative Alpha

Now that we know the formula for Alpha, let’s talk about what the results mean 🤔

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Limitations of Alpha

Alpha gives investors a specific metric for performance, but there are some limitations to consider 🦺

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Fundamental Analysis & Alpha

Now we know that Alpha is important, but how do we incorporate it in our investment strategy? 🤔

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