Posted by Gary Abely, CFP®, AIF®, CPA
“Volatility is not risk, it is the source of future returns.” – Jan. 10, 2016
“Volatility” can be measured by using the standard deviation or variance between returns from a market index over a certain time frame. While volatility is not exactly risk, it can provide an indication of an asset’s risk. In this case, the author of this quote clearly wanted the reader to understand that to obtain long term favorable returns, one must accept the inevitable volatility that comes from investing in equity securities. Undoubtedly, 2017 and future years will have plenty of intra-year moves up and down ten to twenty percent or more.