Alpha
Definition
What is Alpha?
The return attributed to investmentAn asset or commitment of money made with the expectation of future income, growth, or both. skill after adjusting for benchmarkA reference index or rate used to evaluate a fund's performance. performance or market riskThe possibility of loss because broad market prices or rates move against an investment..
Example in practice
How This Looks in Practice
A fund that returns more than its risk-adjusted benchmark may be described as generating positive alpha.
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Related Terms
Total Return
The complete investment result from price changes plus income, assuming distributions are included.
Returns & PerformanceCapital Gain
The profit made when an asset or fund unit is sold for more than its cost.
Returns & PerformanceDividend
A payment made from a company's profits to eligible shareholders.
Costs & FeesManagement Fee
The recurring fee paid from fund assets to the fund manager for managing the portfolio.