Standard Deviation
How bumpy is the ride in this fund?
What is it?
Standard Deviation (SD) measures how much a fund's returns fluctuate around its average. A fund that returns exactly 12% every year has an SD of zero. A fund that returns 5% one year and 20% the next has a high SD.
Think of it as bumpiness. A fund with high SD gives you a wild ride โ great years followed by terrible ones. A fund with low SD gives a smoother journey, even if the total return might be similar.
Lower is generally better for conservative investors. Medium-to-high SD is acceptable in categories like small-cap or sector funds where volatility is expected โ just make sure the returns justify the roughness.
Formula
ฯ = โ[ ฮฃ(Ri โ Rฬ)ยฒ รท n ]RiReturn in period iRฬAverage return over all periodsnNumber of periodsReal Example
Two funds both averaging 13% annual returns.
Given
Calculation
Fund A returns likely range: ~5% to ~21% in a typical year Fund B returns likely range: ~โ5% to ~31% in a typical year
What this means
Both average 13%, but Fund A gets there with far less turbulence. A conservative investor would strongly prefer Fund A. An aggressive investor might accept Fund B for the chance of higher peaks.
Good vs Bad Benchmarks
Below 10%
Very smooth ride โ suitable for conservative investors
10% โ 15%
Normal for large-cap equity funds โ acceptable volatility
15% โ 20%
Typical for mid-cap or aggressive hybrid funds
Above 20%
Significant volatility โ typical for small-cap or thematic funds; not for the faint-hearted
These ranges are for equity funds. Debt funds typically have a much lower standard deviation (under 2%).
Check this ratio for a real fund
MFLens shows Standard Deviation across 1Y / 3Y / 5Y / 7Y / 10Y rolling windows for every Indian mutual fund.
Rolling metrics on MFLens show how each ratio evolves across all historical windows of the selected period. This provides consistency insights beyond traditional trailing calculations. For informational purposes only โ not financial advice.