Two portfolios can both grow 10%. But if one did it with a smooth ride and the other on a roller coaster, the smooth one was “smarter” for the risk it took.
The Sharpe ratio puts a number on that. Higher is better — it means more reward per unit of bumpiness. A Sharpe near or above 1 is generally considered good.
Two runners finish in the same time. One jogged calmly; the other sprinted and collapsed. Same result, but one was clearly the better run. Sharpe rewards the calm runner.
Where these numbers come from
Finisdom compares your growth to the bumpiness, and also subtracts what you could earn risk-free (the interest on a 3‑month U.S. government bill, from the FRED data service). That makes it an honest, “real” Sharpe.