The success or failure of active strategy is always measured on a net-of-cost, risk-adjusted basis against its benchmark.

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Alpha is an annualized return measure that compares the risk and reward returns of a fund to its benchmark.

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The reason to own any individual stock with increased risk is that you expect it to outperform its benchmark.

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Conversely, if your returns are exceeding the benchmark, pay attention to how much additional risk you undertook to achieve the outperformance.

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If the fund can't earn back this hurdle rate plus the category benchmark average by clever stock selection (or reduce risk significantly), you shouldn't own it.

FORBES: The hidden cost of trading

"The conflicts of interest with Hewitt and Aon put EnnisKnupp's clients at high risk, " declares Edward Siedle, a former federal securities regulator who now heads Benchmark Financial Services, an Ocean Ridge, Fla. firm that investigates institutional money manager abuses and also helps in selection.

FORBES: Magazine Article

They will miss the comfortable refuge from default risk, the wealth of noncallable issues, the exemption from state income tax and the dependable benchmark that corporate bond issuers use to price their securities.

FORBES: Treasurys, The Endangered Species

But this is not a simple task, particularly when it involves assets with risk exposures far into the future and which are traded so rarely that there is no good market benchmark for setting the price.

ECONOMIST: New dangers