Volatility
How much an investment's value swings up and down over time.
Higher volatility means larger, faster price moves in both directions — a bumpier ride. Small-cap stocks and equity funds are typically more volatile than large-caps or bonds.
Volatility is not the same as loss: a volatile investment can still grow over time. But it tests an investor's patience, which is why your time horizon and temperament matter when choosing investments.
Key points
- Measures the size of price swings.
- Higher volatility = a bumpier ride.
- Not the same as a permanent loss.
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Related terms
Spreading your money across different investments so that a fall in any one of them has a limited effect on your overall portfolio.
Market CapitalisationThe total market value of a company's shares, calculated as the share price multiplied by the total number of shares.
Bull MarketA period in which prices are generally rising and optimism is widespread.
Bear MarketA period in which prices are generally falling and pessimism dominates, often defined as a decline of 20% or more from recent highs.