how do you calculate standard deviation 
standard deviation is calculated as the square root of the variance alternatively it is calculated by finding the mean of a data set finding the difference of each data point to the mean squaring the differences adding them together dividing by the number of points in the data set less than 1 and finding the square root the bottom linestandard deviation is important because it can help investors assess risk consider an investment option with an average annual return of 10 per year however this average was derived from the past three year returns of 50 15 and 5 by calculating the standard deviation and understanding your low likelihood of actually averaging 10 in any single given year you re better armed to make informed decisions and recognizing underlying risk 