Three rules. Reading a Sharpe before you sign the cheque.
Sharpe is the most quoted ratio in finance and the most carelessly reported. The number on the brochure is almost always picked, not measured. Three checks before you take any Sharpe at face value.
01
Always ask for the volatility next to the return.
CAGR on its own is half a sentence. A 18 pct CAGR with 30 pct vol is a worse product than a 14 pct CAGR with 12 pct vol, even though the brochure prints the bigger number. Numerator without denominator is marketing copy. Ratio is the receipt.
02
Compare like for like. Same window. Same RFR. Same frequency.
Sharpe on a 2015 to 2017 bull window is a different animal from Sharpe across 2018 to 2026. Monthly returns understate vol, daily overstates. Indian fund sometimes quotes against US T bill. If two funds quote different windows, you are not comparing funds. You are comparing the windows their PR picked.
03
Above 1.5 over a decade is rare. Audit before you trust.
A real Sharpe above 1.5 sustained for ten years is a small list globally. If the headline says 2.0 over fifteen years, the methodology is the question. Smoothed monthly NAVs, illiquid holdings priced stale, survivorship in the cohort can all inflate. Real edge welcomes the audit. Inflated edge avoids it.
Closer
A return without its volatility is half a sentence. The Sharpe is the other half. Read both before you sign the cheque, because the half you skip is the half that decides whether you actually hold through the drawdown.