Volatility
Volatility is a measure of how much and how quickly the price of an investment moves up and down over time.
Why it matters
- Higher volatility means larger and more frequent price swings.
- More volatility can increase the chance of panic-selling at the wrong time.
- Volatility is one (imperfect) way of thinking about an investment’s “risk.”
Simple example
- A broad stock-market ETF might move up or down 1–3% in a day.
- A short-term government bond fund might barely move at all on most days.
- Individual growth stocks or cryptocurrencies can move 5–20%+ in a single day.
Volatility and time horizon
Over short periods (days, weeks, months), stock markets can be very volatile. Over long periods (10–30 years), the range of outcomes tends to narrow, and long-term averages matter more.