Risk and Return: Making Sense of Alpha and Beta

Risk and Return Making Sense of Alpha and Beta

Alpha and beta are risk and return measures of the investment. Alpha represents the unsystematic risk. Beta is used to measure systematic risk. Average investor like you and I cannot control the systematic risk (beta) but we can manage unsystematic risk (alpha) with diversification. Investing in a broadly diversified index fund is one of the ways to manage unsystematic risk.

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