what does roy s safety first criterion tell you 
the sfratio provides a probability of getting a minimum required return on a portfolio an investor s optimal decision is to choose the portfolio with the highest sfratio investors can use the formula to calculate and evaluate various scenarios involving different asset class weights different investments and other factors that affect the probability of meeting their minimum return threshold some investors feel that roy s safety first criterion is a risk management philosophy in addition to being an evaluation method by choosing investments that adhere to a minimum acceptable portfolio return an investor can sleep at night knowing that her investment will achieve a minimum return and anything above that is gravy the sfratio is very similar to the sharpe ratio for normally distributed returns the minimum return is equal to the risk free rate example of roy s safety first criterionassume three portfolios with various expected returns and standard deviations portfolio a has an expected return of 12 with a standard deviation of 20 portfolio b has an expected return of 10 with a standard deviation of 10 portfolio c has an expected return of 8 with a standard deviation of 5 the threshold return for the investor is 5 