What is good alpha or beta?

Conversely, beta, which gauges a fund's sensitivity to market movements, is ideally kept around 1 or lower. A beta of 1 indicates that the fund's price movements are in line with the market, while a beta less than 1 suggests the fund is less volatile than the market.

It's essential to note that while a high alpha is desirable, it often comes with a higher beta, implying increased risk. Investors must strike a balance between seeking superior returns and managing risk.

In the realm of mutual fund investing, two crucial risk ratios stand out: alpha and beta. These metrics offer valuable insights into the performance and volatility of a fund, respectively.

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When it comes to alpha, the benchmark for a favorable outcome is anything above zero. Alpha measures a fund's excess return over and above what would be expected given its risk level and benchmark index. Therefore, a consistently high alpha ratio signifies a fund's potential to generate superior long-term returns.