Risk vs. return is a tradeoff inherent in all financial investments. Typically, assets with higher return are associated with higher risk.
The risk/return chart is useful to situate the portfolio against a set of benchmarks, as well as comparing the risk/return tradeoff of the portfolio positions.
- The vertical axis is the total return for the selected period. If the period is 1 year or more, the annualized total return is used, so that it is easier to compare return over different periods.
- The risk is the annualized standard deviation of monthly returns (for periods of 1 year or more) or of weekly returns (for shorter periods) .
The upper left part of the chart is the most desirable asset location (high return, low risk).
By default, the chart also displays the risk/reward points for the portfolio positions. You may click on the positions checkbox to disable these points.
The risk/reward points for major financial indexes and their associated ETFs are displayed when the indexes checkbox is selected.