Variance
Principles of Finance glossary · Risk, Return & Portfolio Theory
Definition
The expected squared deviation from the mean; a measure of dispersion.
Variance in plain English
Variance measures how spread out a set of numbers is, like how much investment returns jump around from their average instead of staying steady. You find it by taking each result's distance from the average, squaring those distances (so negatives don't cancel positives, and big misses count extra), and averaging them. A savings account has almost zero variance because its return barely moves, while a hot stock has high variance because it's all over the place. Bigger variance means more unpredictability, which usually means more risk.
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