Blog, what the think.

The incredible shrinking ‘alpha’

With all the goings on, in the investment world, I have found that we need to keep the human “greed” emotion in check. Also we need to take cognisance of what is happening in the investment world. Peer pressure and following the latest top flying fund may well be to the investors detriment, where the ability to time the market is less important than time in the market. Long term strategies with realistic goals and stepping stones along the way in terms of a person’s overall understanding that investing is for the long haul. There will be peaks and valleys along the journey but those who stay committed enjoy the fruits of their labours.

Below is an article, referring to ‘Alpha’. Alpha is an investment term where Asset Managers provide returns or outperformance compared to their benchmark. Investopedia provides the following definition

A measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund’s alpha.

Expectation is yet another human emotion and the author provides a historical perspective where we can note what has taken place over the past ten years and take the learnt knowledge into the future.

Thanks to Matthew de Wet – Head of Investments for the article.

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