Volatility
How sharply and how often an investment’s price moves. Higher volatility means bigger swings in both directions.
In plain English
Volatility describes how bumpy an investment’s price is. A low-volatility investment moves gently; a high-volatility one can jump or drop a lot in a short time.
It is often measured using standard deviation, and there are indices such as the VIX that track how much volatility investors expect in US shares.
An everyday example
A savings account barely moves day to day. A single technology share might rise or fall 5% in a day. Cryptocurrencies can move far more than that.
Why it matters for investors
Volatility is not the same as losing money, but it makes outcomes less predictable and can tempt people to sell at the worst moment. Knowing how much swing you can stomach is an important part of choosing investments.
In the Knightsman Letters
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Related terms
Education only, not financial advice. Examples are simplified and use illustrative numbers.