When evaluating an equity fund’s volatility, more attention should be paid to “max drawdown”—the maximum decline a fund has experienced from peak to trough over a given period—than to standard deviation (how far returns move from the average). This according to a recent article in The Wall Street Journal.

The article notes that a higher standard deviation generally indicates greater volatility. The stock market’s current standard deviation of 18%, it explains, indicates that “the majority—though not all—of the market’s annual returns have been between 28% and minus 8%. But, because there can be many years of negative returns that well exceed an 8% loss (citing the bear market of 2000-2002), standard deviation only captures a majority of results around an average, not a full range of results.”

When combined with standard deviation, however, the article argues that, “max drawdown can reveal more about a fund’s past volatility than standard deviation alone.” In today’s market, says WSJ, an 8% calendar-year loss might seem dramatic to investors who have enjoyed years of calm markets, “but it is a really ho-hum event in the long stretch of market history when you consider that the last two bear markets—in 2000 to 2002 and 2008-2009—saw drawdowns of 50%.” These statistics can be “more meaningful in conveying the past volatility of the stock market to investors than standard deviation of returns.”