U.S. markets this week have painted the perfect picture of volatility.
But exactly what does stock market volatility mean for investors?
Put simply, volatility is the amount of uncertainty about the size of changes in the stock market.
A higher volatility means stocks’ values can be spread over a larger range — in other words, an index or stock price can change radically over a short time period, either up or down. That’s risky.
Alternatively, lower volatility means that stocks’ values don’t greatly fluctuate. Rather, their values change at a steady pace over time, which is much less risky.