Learn 4 key ways to measure the risk of a mutual fund. Investing Made Simple walks through the fundamentals of investing in a simple and easy to understand manner using short videos to illustrate.
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Hello, What could be the choice if Alpha is 1 and Beta is lower but Standard Deviation is higher? This kind of scenario confuses. You have shown a scenario which has all goodies in it. Can you please show a comparison with other scenarios taken in mind?
Okay that makes better seance. However in terms of the alpha for your video above (assuming you showed the S&P 500 for all three times lets say: "at 1 year return" S&P return = 13, "at 1 year return" S&P return = 14, "at 2 year return" S&P return = 15
Then by "total return" in this case do you mean (for fund 3) Alpha = (16.82+16.96+14.23) - (13+14+15) ? And if this number was lower than your annual risk free rate, you would invest in it?
Also for the sharp ratio, again are you using a single value from the three times or the "total returns"?
TheDragonaf1 so for alpha, a simple calculation is to take the total return (including dividends) of the fund and subtract the total return of the benchmark. Say the s&p 500.
Beta is much trickier. That's why I say just pull it down from a data service like Morningstar. To calculate beta you need to do a regression analysis which compares volatility in the market to volatility in the fund.
I hope this explains it well. If not, let me know, maybe I can make a clearer video on it. This video was my first and the background music really makes it tough to follow. Hopefully the other videos are clearer for you
As in say you have your three funds and you have 5 years of worth of returns in months, you have your S&P 500 (the market returns), and you have an annual risk free rate, can you physically calculate the alpha, beta etc... to see which fund is less risky and better to invest in? if yes, how?
I really appreciate the clear way that the information has been laid out. It should be laid out what type of investor the narrator is, however. In some cases, particularly with younger investors, when there is a long investment horizon volatility can be fine or even desirable. When you are Dollar Cost Averaging and rebalancing the account, the volatility can help get the best average prices for the funds you are buying. Also over a long time horizon, it is completely acceptable to take on more risk (within reason) to get a higher return.
In a time of increasing change and uncertainty, we must be clear on what will not change to not get distracted.
Strategic Portfolio Management.
1. Periodic evaluation and prioritization of the entire innovation portfolio.
2. Strategic and priority-based resource allocation.
On a strategic level, portfolio and resource management must be fully aligned.
3. Release and exit of innovation initiatives.
About the authors.
Dr. Ralph-Christian Ohr has been working in several innovation, division and product management functions for international, technology-based companies. His interest is aimed at organizational and personal capabilities for high innovation performance. He authors the Integrative Innovation Blog.
The Biggest Mistakes in Managing a Portfolio.
The Biggest Mistakes in Financial Planning Series.
by Harvey Jacobson, CHFC, MBA, CLU.
Investors who have remained consistent with their risk profiles through volatile markets have seen a substantial recovery in their portfolios since March 2009. Those who are truly behind are those who panicked and are now left with the decision of how to recover their losses. They can, but it is a much slower recovery.
This article published originally April 13, 2010, Los Angeles Daily News.
Managing an agile portfolio.
When the right people on the right teams have the right context, they naturally do the right thing.
Set the right context.