By Marschant Probart – Certified Financial Planner
Updated 15 Sep 2025
Learn how alpha, beta, and gamma impact your investment returns—and why a financial advisor’s guidance can add 1.5–2% extra return yearly.
Yes, you read that right – and no, it’s not a typo. Today we’ll explain 3 important terms that will help you better understand investment returns and the hidden value of working with a financial advisor.
These are the ABGs of investing:
- Alpha
- Beta
- Gamma
If you’ve been investing long enough you may have encountered two of these terms already when looking at the performance of your portfolio: alpha and beta.
Alpha in Investing
In investing, alpha measures an investment’s performance relative to a benchmark, indicating excess return.
Example: If a South African Equity Fund returns 12% and a benchmark like the JSE All Share Index returns 10%, the alpha is 2%.
This is usually the number most investors focus on, but it’s not the only measure that matters.
Beta in Investing
Beta measures how much an investment moves with the market, reflecting correlation.
Example: If a South African Equity Fund’s price moves more than the JSE All Share Index, it has a beta greater than 1 (and vice versa).
- Beta = 1 → Moves the same as the benchmark
- Beta < 1 → Less volatile than the market
- Beta > 1 → More volatile than the market
- Negative beta → Moves in the opposite direction
The Alpha Everyone Misses: Gamma
There’s a third factor – gamma – and this is where a financial advisor can make a massive difference.
Technically, gamma in finance relates to option pricing. But here, think of gamma as the hidden value an advisor adds – the strategy, adaptability, and behavioral coaching that helps you adjust through market changes, life phases, and financial decisions.
Gamma is about making smarter money decisions – and smarter decisions compound over time.
According to Morningstar research, thoughtful financial planning can add the equivalent of 1.5–2% extra return per year (Morningstar, Blanchett 2013). Over a retirement, that could mean 20–30% more wealth in your pocket.
What Gamma Really Looks Like in Your Life
Here’s how working with a financial advisor adds real-world value:
- Smart Withdrawals → Withdraw at the right time to lower taxes and stretch your savings.
- Steady Nerves in Stormy Markets → Avoid emotional mistakes that can cost years of growth.
- Tax Savings → Place investments in the right accounts to legally reduce your tax bill.
- Life-Aligned Investing → A plan that adapts to your career, family, and retirement goals.
- Turning Complexity into Clarity → Get a clear step-by-step investment strategy that considers what you may overlook.
A Simple Analogy for Alpha, Beta, Gamma
| Aspect | Analogy | Meaning |
|---|---|---|
| Alpha | The racecar finishing ahead | Outperformance vs. the market |
| Beta | Racetrack’s twists and turns | Market movements and volatility |
| Gamma | The driver adjusting speed and handling | Smart decisions that adapt with change |
Together, these show how investment returns work:
- The racecar’s performance (alpha) depends on the racetrack (beta)
- The driver’s ability to adapt (gamma) keeps everything on course
Why This Matters for Your Future
It’s not about chasing short-term returns.
It’s not about getting rich overnight.
It’s about ensuring your money grows steadily, lasts through retirement, and supports the life you want.
Financial advisors don’t just invest your money – they protect you from emotional mistakes, build strategies that maximize tax efficiency, and keep your financial plan aligned with your goals.
That’s gamma – the hidden edge that turns good planning into great outcomes.
Bottom Line
You can’t control the market, but you can control the decisions that shape your future.
Partner with a trusted financial advisor who keeps you on track, helps you avoid costly mistakes, and turns change into opportunity.
Ready to add Gamma to your financial plan? Contact us today.
