Sharpe ratio
A measure of how much return a fund earned for the amount of risk it took.
The Sharpe ratio divides a fund’s return, above a safe risk-free rate, by how much its returns swung around. A higher number means more return for each unit of risk taken. It is useful for comparing funds in the same category, but it looks backward at past data and is never a promise about the future.
Questions people ask
What is the Sharpe ratio?
It divides a fund's return above a safe risk-free rate by how much its returns swung. A higher number means more return for each unit of risk taken.
Is a higher Sharpe ratio better?
Generally yes, for funds in the same category, but it looks at past data and is never a promise about the future.
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