There are three commonly used indicators to measure the level of capital risk, namely standard deviation, Sharp ratio and maximum withdrawal rate. The general fund trading platform will provide the data of these three indicators.
The standard deviation index of funds, also called volatility, is a tool to measure the volatility stability of funds. Refers to the degree of deviation between the weekly (or monthly) return rate of the fund and the average weekly (or monthly) return rate in the past period. The greater the fluctuation of fund income, the greater the standard deviation and the greater the risk. For example, the long-term performance of Fund A and Fund B is similar, but the net value of Fund A fluctuates greatly, while the net value of Fund B fluctuates slightly.
The maximum withdrawal rate index of the fund refers to the maximum withdrawal rate of the rate of return when the net product value reaches the lowest point at any historical point in the selected period. Simply put, it can be used to describe the worst possible situation after you buy a fund.
Other things being equal, the smaller the maximum withdrawal rate data, the better. The greater the extraction rate, the greater the net value fluctuation. For investors who buy in a higher position, the short-term losses are also greater.
The fund's sharp ratio index, also known as the Sharp Index, is used to measure the fund's ability to obtain excess returns after risk adjustment. The higher the Sharp ratio value, the higher the excess return under the condition of taking fixed risks. On the contrary, it means taking certain risks, and there will be little or no excess returns.
There is no absolute data standard for these risk indicators, because the standards of these indicators are different under different fund types, different market conditions and different operating styles, but we can make similar comparisons, put several optimistic funds of the same type together, and choose the fund with small standard deviation, relatively high Sharp ratio and small maximum withdrawal within a period of time.