Risk Adjusted Performance Indicator
Select Equity |
Risk Adjusted Performance In A Nutshell
Risk adjusted performance allows you to depict the return and the risk almost as two separate numbers. This type of data figure can be applied to securities, portfolios, and funds. If you are familiar with options, then you many know the Greeks that measure risk, and you can use those along with any other data point you may have.
Risk is an extremely important factor when choosing your next investment or building your first portfolio. Risk adjusted performance measures the risk that is associated with generating the return that is desired.
Closer Look at Risk Adjusted Performance
Risk boils down to an individual level and is hardly ever the same across the board. For example, if you are in your twenties, it may be in your best interest to take the risks and go after the larger returns. On the flip side, it may not be the best to take on risk if you’re sixty years old and retiring soon.
It is also important before you invest in a fund to measure their risks against the benchmark and what the fund is returning. For index funds, you should typically see the same across the board, but for sector specific, it may not be the same. Take the time to read through the prospectus of each fund you are looking at because it can give you insight into the objectives of the fund, which you want to ensure line up with your investment objectives.
Lastly, you want to look at the performance of the fund because that it what we all really care about in the end. Take a look at the longer time frame because people typically invest in a fund as long term investments. With all of that said, this is where you can implement the risk adjusted performance statistic.
Just like any new investing tool, be sure to test it out and test it on a demo account first to see if it fits your current investing style. This may not be for everyone, but knowing how to implement it can be beneficial for other endeavors down the road. Join an investing community so you can bounce ideas off of them and see how other people are using the same tool. Risk is important and performance is important, using risk adjust performance can help combine those into a number suitable for comparing against others.
Other Indicators
All Technical Analysis
Building efficient market-beating portfolios requires time, education, and a lot of computing power!
The Portfolio Architect is an AI-driven system that provides multiple benefits to our users by leveraging cutting-edge machine learning algorithms, statistical analysis, and predictive modeling to automate the process of asset selection and portfolio construction, saving time and reducing human error for individual and institutional investors.
Try AI Portfolio ArchitectOther Consideration for investing
Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
Equity Valuation Check real value of public entities based on technical and fundamental data | |
Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format |