Unknown Indicator

Information Ratio In A Nutshell

This begins the endeavor into the weeds of finding which investment is going to fit your current portfolio. Beyond benchmark performance, you want to keep in mind the expense ratio and other costs associated with the particular. Reading the information ratio is simple, the higher the number the better the product has done against the respective benchmark.

With the many different products out there, people are always asking how the particular fund is giving them an edge in the market. More specifically with ETF’s and mutual funds, many wonder how they are beating the benchmark and how often they are doing so. The information ratio seeks to give us an answer to this question by measuring how a portfolio fairs compared its respective benchmark.

Closer Look at Information Ratio

The number itself may not tell you the whole story so it is critical that you dig a little deeper. As an investor, you want to understand the risks and how the company is achieving outperformance. It could be from leveraging or other practices, so it is crucial that those align with your investing views.  

Using the information ratio a reasonable way to begin narrowing your search for potential investments. You may also find that the sharp ratio is another effective way to find the appropriate portfolio to invest in. Pick apart the portfolio understanding the reason for the holdings and what is involved with the selection process. Also look at the track record of the manager and see if they have a history of success. All of these factors are important to consider when looking for a particular fund.

Trending Themes

If you are a self-driven investor, you will appreciate our idea-generating investing themes. Our themes help you align your investments inspirations with your core values and are essential building blocks of your portfolios. A typical investing theme is an unweighted collection of up to 20 funds, stocks, ETFs, or cryptocurrencies that are programmatically selected from a pull of equities with common characteristics such as industry and growth potential, volatility, or market segment.

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