The Sharpe ratio is a tool investors use to measure the performance of an investment compared to the risk taken to achieve that performance. In simple terms, it tells you how much extra return you're getting for the extra risk you're taking on. A higher Sharpe ratio suggests better return for a given risk, making it a helpful gauge for comparing different investments. However, it's just one of many factors to consider when evaluating investment choices, so always look at the bigger picture when making decisions.
