What is Portfolio's Alpha?

portfolio
alpha
portfolio analyzer
Co-Authored and Reviewed by Gagan Sandhu, MBA - The University of Chicago Booth School of Business, CEO of Xillion
Posted on . 1 min read

Is my stock portfolio doing better than S&P 500? šŸ¤”

The simple answer is to check if your portfolio's annual returns are more than S&P 500's annual return. But this approach doesn't consider the risk you took by investing in direct stocks.

So the question now is whether are you rewarded enough for the risk taken? For that, you should know your portfolio's Alpha.

So, What is Portfolio Alpha (Ī±)? šŸ§ 

Alpha in general is a measure of your portfolio's ability to beat the market. It is the excess return your portfolio can generate on top of the expected return for the risk undertaken.

Alpha is usually represented as a single number like +2 or -4. This means your portfolio has performed 2% better or 4% worse than the expected returns.

If Ī± > 0, then your portfolio is doing better than expected. šŸ¤‘šŸ¤‘

If Ī± = 0, your portfolio is meeting the expectation. You can try to improve it by optimizing the portfolio.šŸ’°šŸ’°

If Ī± < 0, your portfolio is doing worse than the expectation. You can switch to an Index Fund/ETF instead or you can try to improve it by optimizing the portfolio. šŸ™†šŸ™†

How to calculate Alpha (Ī±)?

Don't worry, that's on us! :) šŸš€ Check Xillion Portfolio Analyzer šŸš€

Share this:
You may also like...
Are you holding any of these stocks in your portfolio?
stocks
portfolio
wealth creators
investing
Posted on . 1 min read
šŸ‘¶ Gen Z was the only generation with rising 401k balances in 2022
investing
gen z
401k
portfolio
portfolio optimizer
Posted on . 2 min read