What the Sortino ratio tells you
The Sharpe ratio treats all volatility as bad — even months where the fund jumped up. Most investors don't mind upside surprises; they fear losses. The Sortino ratio addresses this by measuring return only against downside deviation (the volatility of negative returns).
How to read it
- Higher is better, like Sharpe.
- A fund with steady gains but occasional sharp upside will score better on Sortino than on Sharpe.
- If a fund's Sortino is much higher than its Sharpe, its volatility is mostly to the upside — generally a good sign.
- Compare within the same category and time window only.
How FindMF computes it
From AMFI NAVs we build a month-end return series over completed months. We subtract the monthly risk-free rate (0.07/12), then divide the mean excess return by the downside deviation — the root-mean-square of months where the fund fell short of the risk-free rate — and annualise by sqrt(12). A minimum of 12 months is required, otherwise the metric is suppressed. See methodology; FindMF takes no commission.