What is volatility?

Volatility: How strongly a price moves up and down. Crypto and small companies often move far more than broad index funds.

An investment with low volatility moves calmly. One with high volatility can rise or fall sharply in a single day or week.

Broad index funds are usually less volatile than single shares of small companies. Crypto is known for very high volatility.

Volatility is not the same as a loss. But if you need your money at a moment when the price happens to be low, a swing does become a real loss.

Example
You have 1,000 euros in a calm fund that moves between 950 and 1,050 euros over a year. You also have 1,000 euros in a coin that moves between 500 and 1,500 euros in the same year. That coin is far more volatile.

Watch out
A calm period does not mean things will stay calm. Volatility can rise suddenly and sharply.

Read more in the guide Why markets sometimes fall without anything really happening.

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