Should one look at absolute returns or risk-adjusted returns?

Absolute returns tell you how much money an investment made or lost, without considering the risks involved.

It is a common conception that higher risk leads to higher returns. However, the real skill in investing lies in maximizing returns while keeping risk to a minimum—a principle that distinguishes smart investing from mere speculation.

Absolute returns tell you how much money an investment made or lost, without considering the risks involved. For example, if you invest Rs 1 lakh and it grows to Rs 1.2 lakh, your absolute return is 20%.

But what if that investment was extremely risky, with wild ups and downs along the way? You might have faced big losses before reaching that 20% gain.

Risk-adjusted returns help you understand whether the returns were worth the risk. A safer investment that gives a steady 15% return might actually be better than a highly volatile one that gives 20% but with huge ups and downs.

This is why risk-adjusted returns matter far more than absolute returns, as they reveal how efficiently gains are achieved relative to the risks taken.

PMS AIF WORLD, an alternative investments focused wealth platform, in partnership with IIM Ahmedabad will award the top 15 PMSes in terms of risk-adjusted returns.

This will take place in the Crystal Gazing Investment Summit & Awards 2025, themed “Decoding the Next Bull Run.” Scheduled for February 14–15, 2025, this virtual event promises to provide deep insights into emerging market trends and help investors position themselves for the next structural bull market.

The event will also discuss market outlook for 2025, Pre-IPO and private equity plays, alternative debt strategies, among others.

Click here to register and you can also use MC100 coupon for discount!