How to use standard deviation to determine volatility of a portfolio

We all learned standard deviation in our statics course during high school and we have solved a lot of math questions associated with this concept in classes. But do u know that it can be used as volatility measurement of any given portfolio. It served as important indication how risky one potential investment relative to another in consideration. Let's look at two hypothetical assets with 6 years annual gains. I guess majority of investor will choose Asset B. But let us examine further and calculate the standard deviation.

Asset A with standard deviation 9.52 is expected to be able to generate annual return between 3.48 (13 - 9.52) and 22.52 (13+9.52) wheres Asset B with standard deviation 29.44,32 is expected to be able to generate annual return between -14.44 (15-29.44) and 44.44 (15+29.44) in 2/3 of the time which approximately thirteen out of every twenty years. So obviously Asset B is more risky and volatile although Asset B have bigger average return. In fact, Asset B annualized return is 11% compare to almost 13% of Asset A. Another measurement that can be used to measure volatility is risk drag which have discussed in here.

Be your own steerer when travel in finance ocean

Everyday there are lot of hypes,tips,news and financial pandering sprung out like mushroom after rain. Are u able to distill the gem out? Have you accessed your risk tolerance? Have your plans being twisted by your agent who try to fight for their yearly sales target? Are they qualified in the first place?

As an investor I always want the freedom of

• able to choose my cashing tools from big pool of available investment vehicles.
  
• create my portfolio with the lowest cost
• access my portfolio report anytime anywhere at my own convenience
• trade in my own pace and react fast to circumstances
  
• test out strategies learn from books
• access third party review of finance product information concerned and facts
• receiving high quality services from finance institute who charge premium

I choose to spend more times understanding the game and become an informed consumer. My method is through reading and practicing. I use visualization to picture the success moments to strengthen my faith towards any decisions made.

Remember this your wealth will only increase to the level equivalent to the efforts you are willing to spend.

I have taken my first step to reach my current destination. I'm seeing a bright picture waiting in front.

Tips: No 2 of 36 tips of Wealth Creating: Write yourself SMART check

You want to start investing as mean of wealth accumulating. Let's begin with the end in mind.Have you asked yourself how much money you need to acquire to become rich as defined by yourself? How much money is rich? Well, everyone have his own figures as it depend on one's life style and expectation and it only matter to the individual who set up the target. The important thing is you should not just say "I want to be richer." or "I want to earn more money".This is a vital question u need to think through. With a definite figure, it eliminate ambiguity and give you target to chase after. By then only we can derive plans, strategies and choose the appropriate vehicles. The more definite of your target, the more complete of your investment plan thus chances of become wealthy increase. This is extremely important for most of us who live check by check. You are not afford to lose money.Let's imagine now you are issuing a check to yourself. You precisely specify the figure and the duration. To avoid bounced check, you cant pluck the figures from sky and it highly depend on your result of your investment. Financial adviser recommended we should act prudently in this regard and strictly adhere to S.M.A.R.T. S.M.A.R.T is acronym to Specific, Measurable, Achievable, Realistic, Time frame.

Specific : When you plan your financial goal, you need to be as specific as possible. "After several years, I would buy myself a house" is lame. What do u mean by several year? What type of house? Location? "I want to buy a 3 room condominium in Mutiara Damansara in 3 years time" is a better answer. Now you get it.

Measurable : A specific goal allow you translate into real financial requirement. If you are not able to do so, it imply that your goal is not specific enough.
Achievable : It's not wrong in fact you should always think big if you said your goal is to have billion worth of wealth. The pitfall is when your current income and your goal display big gap, peoples prone to involve themselves in high risk portfolio for highest return. Furthermore, wealth accumulation is a long journey. Imagine you are short distance runner and is put to a marathon for the first time. It's very easy to feel defeated and give up finally when you find out that your financial status still far behind your dream.
Realistic : You need to picture vividly the "rich you" and feel intensely the happiness when dreams come true. Without emotional element as part of the equation, your journey have no meaning because it does not reflect your inner values. The wealth you get from your investment probably just figure which bear no meaning of self realization.
Time frame: Every financial goals should have some time frame attached. It measure your sucess rate after some period of time. Initially you use this time table to check your progress. If you find that you are behind, you need to keep reminding yourself to revise your investment plan. If everything is on track(congratulation :)), naturally you will start to think hard to accelerate and be ahead of the time table.

Start to think S.M.A.R.T. today.

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Tips: No 1 of 36 tips of Wealth Creating