So, you might conclude that there's a 68% chance the next year's returns will fall within the -3.8% to 22.2% range. "That doesn't mean you'll get a 10% return each year." Instead, explains Carlos, you might expect a return of 10% plus or minus one standard deviation.įor example, over the last 10 years, the S&P 500's average annual return was 9.2%, and it had an annual standard deviation of about 13%. "In investing, you may have read that the stock market has historically returned 10%," says Carlos. Does anyone know how to get the standard deviation of a weighted, stratified, clustered dataset (like NHANES) using surveymeans Getting the mean is Press J to jump to the feed. Within a normal distribution - an inverted bell-shaped curve - an asset's returns may fall within one standard deviation of the average 68% of the time, within two standard deviations 95% of the time, and within three standard deviations 99% of the time. It can also be an indicator of an asset's potential volatility and rate of return. Investors may use the standard deviation for an asset, whether that's a specific stock or an index fund, as part of technical analysis.
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