What is the overall standard deviation of my portfolio?
The standard deviation figure represents the overall risk of your portfolio compared to that of a given benchmark (S&P, NASDAQ, DOW). For example, if your overall standard deviation is 4.5 over a given time period and the benchmark’s is 17.2 over that same period, you can surmise your portfolio has about 4 times less risk than the market (these figures are based on the S&P 500). The lower the standard deviation of a portfolio, the more predictable the future returns. I recently spoke to someone who had changed advisors. He told me the broker had given him a 40% return in the last 12 months. I asked him what the overall standard deviation of his portfolio was. He didn’t know. Without knowing your standard deviation, you can fall into the same pit many investors did in 2008-this means big ups and BIG downs. What is the correlation matrix of my portfolio? A correlation matrix represents the true diversification of your assets. Its goal is to smooth out the bumps in the road and strike a b
