Money For the Rest of Us · Wednesday, August 12, 2026
David Stein explains the concept of standard deviation in portfolio analysis to retirees, noting it's not always intuitive. He clarifies that it's used to measure potential negative outcomes, such as how far a portfolio might drop, with higher standard deviation implying a greater potential for loss.
“And and as we've had discussions, it turns out standard deviation is not a terribly intuitive concept.”
“But what we're measuring is the bad things. How far could a portfolio drop? A portfolio with a higher standard deviation, potentially can lose more money than one with a lower standard deviation.”