personal-finance
What is Sortino ratio?
Sep 17, 01:09

While choosing mutual funds, we often look at the return and not the risk that the scheme takes to get there. Sortino ratio is a parameter that helps understand how much risk a scheme has taken. MC30—Moneycontrol's curated schemes—also looks at this metric. Traditionally, the so-called Sharpe ratio also measures volatility. The problem with Sharpe ratio is it does not distinguish between upside and downside return movements. In reality, if a fund delivers excess return even by taking more risk, it doesn't hurt investors. It's only when the scheme falls on the downside that it hurts us more. Sortino ratio measures the downside risk. Higher the Sortino ratio, better is the fund in its risk management.

Gauging downside risk in MF