What does standard deviation measure in my portfolio?

When you started your investment portfolio either through your work as a nurse or through an interaction with a financial professional you should have had a discussion with your advisor around several topics to make sure that your portfolio fits your time frame, risk tolerance, and overall financial goals.

Part of that discussion should be around volatility and standard deviation of the portfolio that you have in place or around the portfolio you are about to create.

First of it is important to have a very basic understanding around what standard deviation is.

In general, the Standard Deviation is a measure of how spread out numbers are so when it comes to your investment portfolio standard deviation measures the variability of the expected returns from a portfolio.

Over longer periods of time having a high standard deviation may not be a problem as there is time to recoup from large negative investment periods but as you approach retirement or other specific time where you need to access an account that could be a serious problem.

Therefore it is always extremely important to understand the structure of your portfolio which includes an understanding of how volatile the specific portfolio could be and an understanding of how that would impact you in the short term and long term.

Over longer periods of time having a high standard deviation may not be a problem as there is time to recoup from large negative investment periods but as you approach retirement or other specific time where you need to access an account that could be a serious problem.

Therefore it is always extremely important to understand the structure of your portfolio which includes an understanding of how volatile the specific portfolio could be and an understanding of how that would impact you in the short term and long term.

Therefore it is always extremely important to understand the structure of your portfolio which includes an understanding of how volatile the specific portfolio could be and an understanding of how that would impact you in the short term and long term.

As you open several accounts over your lifetime either because you move jobs or because you open individual accounts with different funds make sure that you analyze them all together so that you understand what each account is designed for and to make sure that each account is fit for that specific goal and time line.

Also, make sure you understand the risk associated with each account, the tax structure of each account and what the investment philosophy around each account is.

Article Written by CreativeNurse Team
2016-21527  Exp. 4/18