Standard deviation is a fancy term used by financial analysts looking at risk in investment portfolios. It’s a term that need not concern individual, non-professional investors. It’s the return you get from gains and losses you may expect about two thirds of the time over a year.
What are investment risks? A well designed portfolio will consider your acceptable risk. or risk tolerance.' Your investment time objective, age, personal psychology and investment goals are other considerations.
Who will be managing your portfolio? Investors should subject themselves to consideration of manager risk. They do this by choosing an investment portfolio that's fully and actively managed. But what happens if your investment manager leaves or fails to do as well as in the past? That is manager risk and it can't be measured by statistics alone.
I recommend mutual funds or exchange traded funds (ETFs). Better still, I always suggest non-managed funds, those indexed to foreign and domestic standards you want to emulate, such as the S&P 500, as one example.
Paying 1 1/2% of your assets as a minimum charge to investment advisers can represent as much as 20% or more of you annual investment income. That’s stupidity; you will be receiving little practical advice in return.
I never recommend advisers unless you need a tax accountant, lawyer, and/or an estate specialist. (See the Earl J Weinreb NewsHole® comments.)
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