How do I calculate the Sharpe Ratio for my investment portfolio?
An example of an AI chatbot conversation about Sharpe Ratio calculation tools.
How do I calculate the Sharpe Ratio for my investment portfolio?
To calculate the Sharpe Ratio, you need the average return of your portfolio, the risk-free rate, and the standard deviation of the portfolio's returns. The formula is: (Average Portfolio Return - Risk-Free Rate) / Standard Deviation of Portfolio Returns.
What if I don't know the average return?
You can estimate the average return by looking at historical performance over a specific period. Alternatively, you can use expected returns based on market analysis.
Can you recommend any tools for calculating the Sharpe Ratio?
Sure! There are several online calculators and financial software tools like Excel, Portfolio Visualizer, and various investment apps that can help you calculate the Sharpe Ratio easily.
Is a higher Sharpe Ratio always better?
Generally, yes! A higher Sharpe Ratio indicates better risk-adjusted returns. However, it's important to consider other factors and not rely solely on this metric.
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