Tim Bennett Explains: How to weigh up funds using the Sharpe Ratio

Tim Bennett explains a popular number that allows investors to compare funds and the managers who run them.

[sticohh]

Simplest and clearest explanation of this topic. Other videos on Youtube made my head spin from understanding the terms and calculations. Thanks for this!

[albreiki]

Was looking for you in moneyweek to explain this, but found you here

[marketguydanu]

thank you! You explain complicated things in so easy to understand way

[VENUSFTW]

Literally the best explanation out there. The other youtube videos don't even compare

[tarilonte]

Powerful yet simple explanation. Thank you very much.

[raulgarcia]

Your the best Tim! I've made 2.3 million just from watching all the videos you produce over the years. Keep up the great work and have a blessed day.

[maxlatour]

Very Very well explained video Tim. The 2 very's are not a typing error :)

[David-]

Like most videos on Sharpe Ratio, this explains the formula, but it then skims over why a higher Sharpe Ratio is better than lower, and so how to actually use Sharpe Ratio. Specifically, why is taking on additional risk for a higher return bad?
What if historical returns aren't normally distributed? (at the least they usually have fat tails) But in particular, what if there is skew in the historical returns? (which there often is) Could skew lead to the conclusion that higher risk is better?

[martino]

If you have only a couple of extreme returns and they are positive, but far from the average return, will your sharpe ratio be reduced? If so, wouldn't that be a flaw in it's validity as a gauge of value?