Volatility Explained: Should You Be Afraid Of It

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Introduction

In this video, we will explore the concept of volatility mainly

• What volatility is and how do we measure it

• What causes volatility

• The expected volatility of the different asset classes

• Is volatility good or bad for investors

• How do we deal with volatility

1. What is volatility & how to measure it

Volatility is an up and down movement of the price of the investment.

When we say something has high volatility, what we mean is that the prices of the investment move up or down drastically.

Conversely, when we say something has low volatility, what we mean is that the prices of the investment do not move up or down too much.

How then can we measure volatility?

In statistical terms, volatility is measured and represented by the standard deviation (a.k.a. the amount of variation) of the investment’s annualised r