The Morningstar Dictionary - Sharpe ratio

The most widely used method for calculating a fund's historical risk-adjusted performance

Wendy Stein 14 December, 2017 | 6:00PM

 

 

Wendy Stein: As an investor, it's very easy to fall into the trap of focusing simply on return -- the investment with higher returns is more coveted than the one with lower returns. But we must also take risk into account when assessing investments. How do you do that? And what about when two funds have similar returns, how do you determine which is a better investment in terms of risk and return? This is where the Sharpe Ratio can be quite helpful.

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About Author

Wendy Stein

Wendy Stein  Wendy Stein is a product manager at Morningstar Canada. She manages products for investment research, portfolio construction and retirement planning. Before joining Morningstar in 2010, she worked as a product manager in the mutual- fund industry for Invesco and Manulife in Canada and Legg Mason in the UK.