Good question. There is a risk-return trade-off. On average at least, we expect riskier investments to have larger returns than less risky investments. So, the fact that an investment appears to have a high or low return doesn’t tell us much. We need to know if the return was high or low relative to the risk involved. Instead, to determine if an investment is superior, we need to compare excess returns. The excess return on an investment is the difference between what that investment earned and what other investments with the same risk earned. A positive excess return means that an investment has outperformed other investments of the same risk. Thus consistently earning a positive excess return is what we mean by “beating the market.”