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Understanding the standard deviation

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The standard deviation can show the consistency of an investment's performance over time.
A fund with a high standard deviation shows price volatility.
A fund with a low standard deviation tends to be more predictable.
The standard deviation is calculated by taking the square root of the variance, which is itself the average of the squared differences from the mean.
Understanding the standard deviation
One reason for the great popularity of the standard deviation measurement is its consistency.

The standard deviation of the mean represents the same, whether you look at gross domestic product (GDP), crop yield, or height of various dog breeds. Also, it is always calculated in the same units as the data set. You do not need to interpret an additional unit of measure resulting from the formula.


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