Standard Deviation definition

Standard Indicator of Fund Deviations. If the fund has a high average standard deviation value, the range of its results is very wide. This means that the fund is potentially volatile and tends to fluctuate in the value of the securities it has issued. A low standard deviation indicates that the fund's returns are a stable variable.

The average annual value of the fund's standard deviation, which it publishes in its Morningstar reports, is calculated based on the fund's performance over 36 months. By definition, the overall rate of return of any fund should not deviate from the average rate of return either downwards or upwards by a value that exceeds the standard deviation for a period of 68% of the time period.

In addition, in approximately 95% of the time period, the total return on the fund should not exceed a value that is twice the value of the mean standard deviation. Compliance with these parameters means that profitability indicators can be displayed in the form of a typical bell curve that reflects a normal probability distribution. In any case, the larger the standard deviation, the greater the volatility of the fund.