What it is
Volatility refers to how much and how quickly the price of an investment goes up and down over time. When volatility is high, the price of an investment may change a lot in a short period.
Low volatility is when the price remains steady or is little changed over a short span of time.
What it means for you
Volatility is 1 measure of how risky an investment is. That’s because the higher it is, the less certain you are that you’ll get the profit you expect when you expect it.
For example, stocks are generally more volatile than other investment options since their prices are influenced by a lot of factors.
The prices of some stocks may swing wildly in either direction from 1 day to the next, especially if there’s a significant event affecting supply and demand.
On the other hand, fixed-income assets like bonds are less volatile because their values tend to be more stable and predictable. With these, it may be easier to tell how much you’ll earn and when.
Investments that pose a greater risk also typically offer the possibility of higher returns. This means highly volatile investments may also give you better potential to grow your money rapidly and by a lot – if you can withstand the risks.
On the flip side, investments with low volatility tend to offer more modest returns. They may be more suited to investors seeking steady and consistent growth.
