The Alpha Ratings system stands out from other popular stock rating systems in several ways. Firstly, it benchmarks all listed instruments in India based on a risk-adjusted return basis.
Unlike other rating systems, Alpha Ratings is updated every month. This frequent updating ensures that investors have access to the most up-to-date rating and can make informed decisions based on current market conditions.
One significant advantage of Alpha Ratings is that it is entirely automated and every stock is rated and ranked using the same formula. It relies on rational analysis rather than human biases or emotions, such as fear and greed. This automation helps to eliminate subjective judgments and biases that may be present in other systems, resulting in a more objective evaluation of investment options.
By focusing on instruments with a track record of consistent performance, Alpha Ratings provides valuable insights for long-term investors seeking reliable investments.
In contrast, most of the other rating systems are ‘issuer ratings’. I.e.: The company being evaluated has paid for it’s stock or bond to be rated. There are several drawbacks of such a system which have been exposed during severe market crashes such as the financial crisis of 2008. The main drawbacks include:
- Issuer ratings are not always current, if the company is not doing well then it does not have any incentive to pay for it’s rating to be downgraded.
- Issuer ratings are subjective. I.e.: There is no common formula that the ratings provider follows to issue ratings to any two companies, even within the same sector. This subjectivity makes these ratings difficult to use for comparison.
- Finally, issuer ratings have a conflict of interest. I.e.: The company providing the rating is being paid for by the company receiving the rating.
In summary, Alpha Ratings differentiates itself from other rating systems by benchmarking instruments on a risk-adjusted return basis, providing monthly updates, being fully automated, focusing on rational analysis rather than human biases, discovering steady outperformers, and generating rankings and ratings based on consistency of returns. These differentiations make it an ideal choice for investors looking for reliable investment opportunities.