For investors seeking to assess the risk and return trade-off of multiple mutual funds, it may be useful to utilize a metric that enables comparison. The Sharpe Ratio, created by Nobel laureate William F. Sharpe, is one such metric. This article will outline the Sharpe Ratio, its calculation method, and its relevance in evaluating mutual funds.

• An investment instrument that pools money from many investors and uses that money to invest in a diversified portfolio of stocks, bonds, or other securities. 
• It is managed by a professional investment company.
• It offers diversification, professional management, and liquidity.