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What Is Risk-Adjusted Return And How Could It Help You Calculate Risk?

Aug. 03, 2022 3:48 AM ETUSMV, EFAV, EEMV
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  • Understand how risk-adjusted return is calculated and how it could help investors manage market volatility and improve long-term performance.
  • Investors may make the mistake of focusing on return in its most basic form, without considering the risks they’re exposed to in order to achieve those returns.
  • Weakness in stocks in recent months provides a good reminder of why risk-adjusted return is such an important tool for investors to use to stay on track to meet their long-term goals.

Risk Return concept

Andres Victorero

By Daniel Prince, CFA

Risk-adjusted return is a critical element to successful long-term investing, and one often overlooked — or misunderstood — by newer investors. I view risk-adjusted returns as perhaps the most important, least understood part of investing; after all, the return potential of any

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