Episode 5 on the Wilson Wealth Management YouTube channel looks at standard deviation as an objective measure of investment risk.
Comparing investment risk between assets is difficult. There are so many different asset classes, subclasses, geographies, capitalizations, maturity dates, etc. Each with its own unique risk-return profile and factors.
Assessing investment choices becomes an “apples to oranges” proposition.
So how do investors turn analysis into “apples to apples” comparisons?
Through the use of standard deviations. This statistical measure, as well as risk-return ratios utilizing standard deviation, help investors more objectively compare highly varied assets.
In this episode, we look at this concept, some common risk/return ratios, and limitations in using standard deviation as a risk measure.
