Greater than 1 is preferred. Sharp ratio is the ratio of evaluating investment performance according to the capital market line. The higher the Sharp ratio, the higher the excess rate of return. Therefore, the Sharp ratio is better than 1.

Investors who pursue high risks and high returns can invest in funds with high Sharp ratio. However, if investors have limited risk tolerance, they can invest in funds with a Sharp ratio of 0 to 1.

What is the sharp ratio?

In layman's terms, the Sharp ratio is an indicator to measure the fund ratio invented by an economist named Sharp. The greater the value, the better. Sharp ratio = (return on investment-risk-free interest rate)/standard deviation. The numerator is the rate of return of the fund we invest in, and the denominator of the formula is the risk we take.