personal-finance
What is downside deviation of a mutual fund?
Oct 19, 10:10

If you are a cautious mutual-fund investor, you need to be familiar with the scheme's Sortino ratio. In particular, you need to consider its denominator, the downside deviation, which is a kind of standard deviation. Standard deviation of a scheme measures its upside and downside volatility. But upside volatility doesn't really hurt an investor; it's when your fund goes down that it pains, which is what the downside deviation captures. Sortino ratio shows how much returns a fund makes even with its downside deviation. Higher the Sortino ratio, better is the fund.

Gauging bad volatility