When we measure returns, the standard deviation tells us how far away from the average return our return expectation should be. For example, if a fund’s average return is 10 per cent with a standard deviation of 2, then 68 per cent of the times (called 1 standard deviation), the fund’s returns will lie in the range of 8 per cent and 12 per cent. And 95 per cent of the times (called 2 standard deviations), the returns will lie between 6 per cent and 14 per cent.
