Alpha, Beta & Benchmarks

Measure returns and risk against the right yardstick.

1. What Alpha Means — Alpha is the return you earn beyond what your risk level would have delivered anyway. Here is how to calculate it, why raw returns can mislead and what a real alpha estimate looks like.
2. What Beta Measures — Beta measures how much a stock tends to move when the market moves. Here is how to read it, real betas for well-known stocks over the past year and why beta can change.
3. Choosing the Right Benchmark — A benchmark is the yardstick you measure performance against. Pick the wrong one and you can look brilliant or terrible for no good reason. Here is how to choose one, with real benchmark returns.
4. Luck vs. Skill — In markets, luck can look like skill for years. Here is why short track records mean little, how many “winners” appear by chance alone and how to tell the difference.
5. Active vs. Passive — Active funds try to beat the market; passive funds try to match it cheaply. Here is how they compare on cost and results, and where each approach can make sense.
6. Using Beta in Position Sizing — A $10,000 position in a high-beta stock carries far more market risk than $10,000 in a low-beta stock. Here is how to use beta to size positions and understand your portfolio’s true market exposure.
7. Why Alpha Is Hard to Keep — Even when an investor finds a real edge, it tends to shrink over time. Here is why alpha decays through competition, costs and growth, and what that means for anyone trying to beat the market.