Definition
Volatility measures the size of price movements of a stock or market. A stock with high volatility swings a lot in value — it can rise 5% one day and fall 7% the next. A stock with low volatility moves steadily and calmly.
High volatility
Technology stocks, crypto, small cap. Large opportunities — large risk. Suits active investors with high risk tolerance.
Low volatility
Consumer staples, utilities, government bonds. Stable and predictable. Suits conservative investors near retirement.
VIX index: Called the "fear index" — measures expected volatility in S&P 500. Above 30 = high fear. Below 15 = calm and complacency.
"Waves are not dangerous for those who have learned to swim. Understand volatility and it becomes your friend."— Florence Scovel Shinn