Since risk is so important, how should we measure and judge the risk of a fund? Here is a basic index to measure the risk coefficient of funds: volatility.
Volatility is also called standard deviation in statistics. Standard deviation is a concept to measure random variability, and it is a measure of the degree of change in the return on investment of the underlying assets.
Statistically speaking, it is the standard deviation of the return on investment of the underlying assets calculated by compound interest. Volatility represents the change of income, which is actually equivalent to risk. Volatility represents the degree of change in returns. The greater the fluctuation, the more drastic the change of income, that is, the more drastic the rise and fall of the fund, which also represents the higher the risk coefficient of the fund. On the other hand, the smaller the fluctuation, the smaller the change of income, and the relatively stable rise and fall of the fund, that is, the smaller the fund risk.
When using the volatility index, we need to define an evaluation interval. There are two funds, A and B. When evaluating the volatility of fund A, we use the volatility data of one month, and when evaluating fund B, we use the volatility data of one year. The data of A is greater than that of B, so you can't conclude that the risk of A fund is higher than that of B fund, because you use different evaluation time periods.
When we measure the volatility, we usually choose the same time period, which is generally measured by the volatility of one year. The data of volatility can be viewed through the fund details pages of major fund platforms.