The five risk numbers, in plain English

Every serious portfolio tool shows the same five statistics. Here's what they mean, what "normal" looks like, and which one deserves most of your attention.

Volatility — how bumpy the ride is

The annualized standard deviation of returns. A diversified stock portfolio typically runs 13–17%; a 60/40 stock-bond mix nearer 10%; a concentrated tech bet 25%+. Volatility isn't loss — it's how far a normal month strays from average, in both directions.

Max drawdown — the pain you had to survive

The worst peak-to-trough fall over the period. This is the number your stomach experiences. The S&P 500's monthly-close drawdown was about -24% in 2022; in 2008-09 it exceeded -50%. If you sell at the bottom, every other statistic is fiction — which makes drawdown the most behaviorally important number on the page.

Sharpe ratio — return per unit of bumpiness

Annual return divided by volatility (we use a 0% risk-free rate for simplicity). Below 0.5 means you took a lot of shaking for the growth you got; around 1.0 is historically good for stocks held over long windows; sustained numbers far above 1.5 usually mean a lucky window rather than a magic strategy.

Sortino ratio — the fairer Sharpe

Same idea, but only downside moves count as risk — because nobody complains about upside surprises. Sortino is always at least as large as Sharpe; the gap tells you whether the volatility was mostly good or bad.

Beta — how much you move when the market moves

Beta of 1 means you rise and fall with the benchmark. A dividend-heavy portfolio might sit near 0.5–0.8 — calmer than the market; leveraged or tech-heavy portfolios exceed 1. Neither is virtuous by itself; beta describes the deal you've made, not whether it's a good one.