A number that describes how bumpy the ride has been.
Direct answer
Standard deviation shows how far an investment's returns have typically moved from their average. A higher number means bigger swings. It is a common measure of volatility, but it does not predict the future or capture every type of risk.
Simple example
Fund A returns between 4 and 6 percent each year. Fund B returns between -10 and 20 percent. Fund B has a much higher standard deviation.
Uses and limits
Uses: compare how volatile investments have been. Limits: it is based on past data, treats up and down moves equally and ignores the risk of rare extreme events.
Where Teyro fits
Teyro's How to Understand Investment Risk course turns this into short lessons you can play in a few minutes a day. It has 50 lessons, and you can start free.
The bottom line
Use it as one tool among several. This is general education, not advice.
This is general education, not personal financial advice.
