Volatility in the Market Explained
Investing involves risk including loss of principal, so for any Investors, an increase in the value of their investments is an important concern. There is no point in investing if there is no increase in value over a period of time. In general, Uncertainty is a major cause for volatility, Sometimes the value of an investment falls stays flat, or appears to jump up and down. when the stock market rises and falls more than one percent over a sustained period of time, it is called a "volatile" market.
Volatility in investing is the frequency and degree of fluctuation in the price of a security. The more volatile security is, the more likely it is to go up or down in value in the short term. Downward moves tend to get more attention and be more associated with volatility, It’s understandable to be concerned about rising volatility. If volatility is high for a stock, that means it could be a risky bet because of wild price swings. As long as market swings remain under control, these players continue to buy. But when a volatility shock arrives, they start to sell, and the higher their positioning, the faster they unload. The problem comes because dealers and market makers volatility is normal for financial markets. Many things can influence the value of shares – and other assets such as bonds. Events such as Earnings reports, central bank interest-rate policy, elections, wars, and natural disasters, governmental decisions, or global events are a few. The important thing to remember is that although the value of your investments may fall in the short term, evidence from history suggests that in the long term they are likely to rise. You can't altogether avoid volatility, but portfolio diversification and other investment strategies allow you to use it to your advantage.