Sharpe Ratio on WebNotes

How to compute risk-adjusted return for a mutual fund

Tue, 19 May 2026 00:00:00 +0000

Risk-adjusted return beats raw return as a fund comparison metric. Two funds with 12% CAGR but different volatilities are not equivalent; risk-adjusted captures the difference.

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Step-by-step procedure

See the procedure infobox above for the eight steps.

Sharpe ratio in mutual fund performance

Mon, 18 May 2026 00:00:00 +0000

The Sharpe ratio is a widely-used measure of risk-adjusted return that computes excess return per unit of total volatility. Developed by Nobel laureate William Sharpe, it remains one of the most-cited performance metrics in mutual fund evaluation.

For Indian retail investors comparing mutual fund schemes, Sharpe ratio enables apples-to-apples comparison of risk-return profiles across different schemes.

Formula

Sharpe ratio = (Scheme return - Risk-free return) / Standard deviation of scheme returns

Sharpe ratio in mutual funds

Tue, 12 May 2026 00:00:00 +0000

The Sharpe ratio is a measure of risk-adjusted return that quantifies how much excess return (return above the risk-free rate) a mutual fund has delivered per unit of total risk, where total risk is measured by the standard deviation of the fund’s returns. Named after Nobel laureate William F. Sharpe who introduced it in 1966, it remains the most widely cited single performance statistic in the Indian mutual fund industry.