GLOSSARY TERM
Volatility
Volatility means how much the price of an investment moves up and down over time.
What does this mean in practice?
If an investment’s value changes a lot in short periods, it has high volatility. If it moves more steadily, it has lower volatility. Volatility does not automatically mean permanent loss, but it does mean the investment can feel less predictable in the short term. Stocks usually have higher volatility than bonds or cash, especially over shorter periods.
Example
A broad stock ETF may fall 15% in a difficult period and later recover. A savings account usually does not move like that at all. The ETF has higher volatility, even if it may offer better long-term growth.
Why it matters
Volatility matters because even good long-term investments can feel uncomfortable when prices move sharply. Understanding volatility helps you choose a portfolio you can stay with through both rises and declines, without making emotional decisions at the wrong time.
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