Alpha

Alpha

Alpha is a useful measure that helps you assess the effectiveness of your mutual fund. It compares the fund's performance against a designated index. If the mutual fund generates higher returns than the index within a specific timeframe, it could be a good investment option for you.

When the Alpha value for a mutual fund is 0, it earns returns that are the same as the benchmark index. In comparison, an Alpha over 0 means the fund earns more than the index, while an Alpha less than 0 indicates that the fund doesn't perform as well as the index.

Investing in a fund with an Alpha greater than 0 may be beneficial, as it indicates that the fund has outperformed the benchmark index in the past.