What Is a Good Sharpe Ratio

Sun, 12 Apr 2026 16:50:48 +0000

**What Is a Good Sharpe Ratio? Understanding Risk and Return for Smart Decision-Making** Curious about how to measure a sound investment strategy without oversimplifying risk? One of the most widely discussed metrics in today’s financial conversations is the Sharpe ratio—a tool gaining traction among investors, educators, and everyday people navigating market volatility. But what exactly defines a “good” Sharpe ratio, and why is it becoming a focal point for those managing risk and reward? The Sharpe ratio, named after Nobel laureate William Sharpe, measures excess return per unit of risk. It compares the return of an investment to a risk-free benchmark—like a U.S. Treasury bond—adjusted for volatility. High returns without high risk are ideal, but the ratio distills this complex balance into a single number that helps respondents assess performance more clearly. ### Why the Sharpe Ratio Is Increasingly Relevant in the US