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Volatility
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How much a price fluctuates. High volatility = strong swings (riskier, but also more opportunity). Low volatility = stable prices.
Volatility measures how much a price fluctuates. A share that rises 5% one day and falls 4% the next is highly volatile. An overnight money account with a fixed interest rate has zero volatility.
Practical example: Bitcoin can fluctuate by 10% in a single day – extremely high volatility. The MSCI World fluctuates by 1–2% per day on average. A fixed-term deposit doesn't fluctuate at all.
Important for investors: volatility is not the same as risk. Short-term fluctuations are normal – if you invest for the long term (10+ years), you can sit out volatility. It only becomes a problem if you have to sell during a downturn.
Did you know? The VDAX-NEW (Germany's volatility index) hit its all-time high of 93.3 points on 16 March 2020, while it is only 11–15 points in calm phases.
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