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Better than Alpha summary

Christopher Schelling

Three Steps to Capturing Excess Returns in a Changing World

3.8 (65 ratings)
24 mins

Brief summary

Better Than Alpha by Christopher Schelling challenges toxic masculinity and promotes emotional intelligence. It's a guide for men to live happier and healthier lives by prioritizing open communication, self-reflection, and empathy.

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    Better than Alpha
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    Alpha is enticing – but it's also unreliable and easily manipulated.

    Alpha. If there’s one thing you share with your fellow investors, it’s probably a fascination with this alluring and elusive target. But, just like a beautiful mirage, alpha seems to disappear on closer inspection.

    Before we examine this mystery in more detail, let’s take a moment to define alpha – a term that’s often misused. Alpha is the excess return of an investment relative to the benchmark index. In other words, alpha is basically a measurement of how well an investor is beating the market. By contrast, beta is the index return that’s achieved through passive ownership of securities in a specific market.

    As an investor, you want alpha – not beta. However, that’s easier said than done.

    The key message here is: Alpha is enticing – but it's also unreliable and easily manipulated.

    Managers can easily distort alpha to suit their own ends. By picking their own index and choosing an easy-to-beat beta, they can present excess returns as alpha. But, as the saying goes, all that glitters is not gold. Close analysis often reveals that this so-called alpha is actually beta. This is why it’s so important for managers to use effective benchmarks before making the investment.

    Alpha is frustratingly random and unreliable. It comes and goes. This trend is apparent in public markets, private equity, and hedge funds. The latter originally appeared to be an alpha success story, with hedge fund superstars like Warren Buffett and Barton Biggs making breathtaking returns.

    But the data shows that since 2005, hedge fund alpha has been in decline. The author gives the example of one hedge fund that boasted historical returns of “100% pure alpha” – only to collapse just a few years later.

    The erratic nature of alpha poses a particular problem for large asset owners, who may suddenly have to rethink their allocations of billions or trillions of dollars in capital. When you’re dealing with such a vast pool of capital, it’s a little like piloting a huge aircraft. It takes awhile to get up to speed, and you can’t suddenly change direction.

    Individual investors also need to be cautious. As alternative investments like private equity and hedge funds become available for individuals, more people risk being misled by the alpha mirage.

    It’s easy to fall for the hype or get confused by acronyms and buzzwords. In the next blink, we’ll take a closer look at the true nature of alpha – without the jargon.

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    What is Better than Alpha about?

    Better than Alpha (2021) encourages investors to let go of their obsession with alpha – the amount an investment has returned compared to the market index. It explores what really drives returns, so you can build a successful portfolio and meet your investment goals instead of chasing rainbows.

    Better than Alpha Review

    Better than Alpha by Christopher Schelling brings a fresh perspective on personal growth and self-improvement. Here's why this book is worth reading:

    • Offering unique insights and unconventional ideas, it challenges conventional wisdom and encourages readers to think outside the box.
    • Packed with practical strategies and actionable advice, it provides readers with tangible steps to implement and apply in their own lives.
    • Through engaging stories and relatable examples, the book captivates readers, making personal development both relatable and enjoyable.

    Who should read Better than Alpha?

    • Investors who want to make better decisions and improve their portfolios
    • People with an interest in behavioral finance
    • Anyone who wants to see through the hype and learn the truth about alpha

    About the Author

    Christopher Schelling is an experienced institutional investor who has allocated $5 billion throughout his 20-year career. He currently serves as Managing Director at Windmuehle Funds in Austin, Texas. He’s also a contributor to publications such as Institutional Investor and the Wall Street Journal.

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    Better than Alpha FAQs 

    What is the main message of Better than Alpha?

    Achieve success by rejecting toxic masculinity and embracing a more holistic approach to personal growth.

    How long does it take to read Better than Alpha?

    The estimated reading time for Better than Alpha is a few hours. The Blinkist summary can be read in just 15 minutes.

    Is Better than Alpha a good book? Is it worth reading?

    Better than Alpha is worth reading because it challenges traditional views on masculinity and provides actionable insights for personal development.

    Who is the author of Better than Alpha?

    Christopher Schelling is the author of Better than Alpha.