Market volatility refers to the frequency and magnitude of price movements, up or down, in a market or security. The bigger and more frequent the price swings, the more volatile the market is said to be. Volatility is a normal part of investing and is to be expected in a portfolio. It is often measured by finding the standard deviation of price changes over a period of time. In general, bullish (upward-trending) markets tend to be associated with low volatility, while bearish (downward-trending) markets usually come with unpredictable price swings, which are typically downward.
Market volatility can be seen as an opportunity for long-term investors to buy assets at a lower price. However, it can also be a source of anxiety for investors who need short-term liquidity. To manage volatility, investors can diversify their portfolio, review their financial goals, and focus on the long-term. It is important to note that volatility is a key factor when pricing options contracts.
In summary, market volatility is a measure of how consistently an investment or index has performed, and it is a normal part of investing. It can be managed by diversifying a portfolio, focusing on long-term goals, and reframing it as an opportunity.
