Click here for a 30-day free trial. Well, buck up, because over the long term, there's a decent chance you're going to make more money. Funds that post big returns in good years but also lose scads of money in down years still tend to do better over time than funds that post slow, steady returns without ever losing much. And if they have higher upside, they will end up with higher returns. In the long-term, the tendency of volatile investments to outperform their more stable counterparts can be examined through a measure of statistical risk called standard deviation.
Standard deviation measures the range in a fund's performance, usually over a three-year period.
A high standard deviation indicates a fund's performance has fluctuated a lot from year to year. A low standard deviation reflects little volatility in returns. Some bond funds, for example, claim standard deviations of less than a point. In the next year, your holdings would have gotten creamed. The tendency for volatile investments to best those with steadier returns is even more pronounced over time.