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Volatility

Definition

How much an investment's price swings up and down over time. High volatility means big price swings (crypto, growth stocks). Low volatility means steadier prices (bonds, blue-chip stocks). Measured by standard deviation — bigger number means wilder rides.

Why It Matters

Volatility is not the same as risk, but they're related. Young investors can handle volatility because they have time to recover. Retirees need lower volatility because they're withdrawing money and can't wait for a recovery.

Example

The S&P 500 has averaged ~10% annual returns, but individual years range from -37% (2008) to +32% (2013). Bitcoin has seen 80%+ drops. A high-yield savings account barely moves. Same concept, wildly different volatility.

Related Tools

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Related Terms

Risk ToleranceDiversificationAsset AllocationBondBear MarketBull Market
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