Standard Deviation

Standard Deviation or SD is a measure of the dispersion or deviation of data from the average or mean. A high Standard Deviation means the data is farther from its mean and a low SD value means it is close to the average. An investment with a higher SD has a greater scope of upward or downward movement and that too, in a much wider band. Standard Deviation is proportional to the risk or volatility associated with the fund or portfolio. It depicts a fund’s performance over a time-frame. Higher the standard deviation, the higher the risk taken by the fund. While comparing two funds with same returns, the one with lower Standard Deviation will be better.