Glossary· Risk
What is Standard deviation?
Also known as Volatility
How much daily returns scatter around their average, annualized. Trailing 3 years.
Higher means bigger swings in both directions. It is a decent proxy for how uncomfortable a fund is to hold, and a poor one for how much you can lose — for that, read max drawdown.
For the formula and the constants behind this figure, see Methodology.
Guides that use Standard deviation
10 guides put this term to work.
- Can you lose money in mutual funds? Understanding market riskYes — but temporary, permanent and self-inflicted losses are three different things, and the largest source of realised loss is behavioural rather than market.
- How to read a mutual fund factsheet like a proRead it backwards: mandate and benchmark, then holdings and concentration, then cost, then risk — and only then returns. Four minutes, in the right order.
- Demystifying the riskometer: how to read SEBI’s risk levelsPortfolio-derived, updated monthly and comparable across fund houses — useful for spotting mismatches and changes, far too coarse to pick between equity funds.
- Money market to long duration: the rest of the debt fund ladderMost debt categories are one variable cut into bands: lending duration. Walk the rungs, match the band to your horizon, and note the floaters off it.
- Sharpe and Sortino: measuring risk-adjusted returnsVolatility, Sharpe, Sortino and maximum drawdown measure four different things, and only one of them predicts whether you will still be holding in year three.
- Tracking error and standard deviation in passive fundsOne measures how much a fund moves, the other how much it moves differently from its index — and neither is the number that actually reaches your returns.
- Debt and gold as shock absorbers: hedging an equity portfolioBallast does not raise returns — it lowers the worst year and gives you something to sell that has not fallen. Why credit-risk debt is not a hedge.
- Loss aversion: why a fall hurts twice as much as a rise helpsFive expensive behaviours it produces, and why knowing about the bias does not switch it off — the defences that work are structural, not emotional.
- Elections and politics: what markets actually doVolatility rises before and falls after, and the direction is unforecastable. Why 'wait for clarity' needs two correct decisions, and what to watch instead.
- Wars, Fed rates and oil: how global macro reaches your fundFive traceable channels from a foreign headline to an Indian NAV — and why domestic SIP flows have made the biggest of them less dominant than it was.
More on risk
How rough the ride was — the half of the story a return number hides.
- Maximum drawdown
- The largest peak-to-trough fall the fund has ever had, over its full history.
- Sharpe ratio
- Return above the risk-free rate, per unit of total volatility.
- Sortino ratio
- Like Sharpe, but only downside moves count as risk.
- Riskometer
- A six-step risk label from Low to Very High, in SEBI's format.