Get the app
Get the app

Join millions of investors on Stash

Investing, simplified

Start today with as little as $5
Get the app
Teach Me

Why Is The Market So Unpredictable? Let’s Talk Volatility

October 19, 2018

  • Volatility measures change
  • Beta is a measurement of an asset’s volatility
  • A beta of less than one generally means an asset is less volatile
2 min read

Market volatility can mean uncertainty and unpredictability. And if there’s one thing investors tend to worry about, it’s uncertainty. After all, most investors want a stable return on their investments.

But markets aren’t always tranquil. Some days they’re up. Some days they’re down.

Here’s the thing. That’s normal. Markets always change, they are unpredictable and sometimes they can be volatile.

What is market volatility?

Broadly speaking, market volatility measures the rate of deviation away from an average. In other words, when experts think of volatility, they look at the degree of change in a security’s price over time.

In the case of investments—stocks, bonds, ETFs, etc.—financial experts use volatility to gauge an asset’s value over a given time, compared to an average or index. The more an asset’s price moves, the more volatile experts consider it to be.

Generally, individual stocks are more volatile than bonds, ETFs, and mutual funds. That’s because an individual stock is issued by a single company, and many different factors, both inside and outside the company, can affect how it performs. Bonds tend to be less volatile because they are a form of debt with specific plans for repayment. And funds are potentially less volatile than a single stock because they are baskets of stocks (or bonds), which can help spread risk by investing in numerous companies at once.

Many things can cause volatility, including political uncertainty, news related to a specific company and its stock, or investment dollars flooding into or out of the market.

Financial experts use volatility to gauge an asset’s value over time, compared to an average or index.

What’s the Vix?

Often when people on Wall Street talk about volatility they’re referring to the VIX.

The VIX is another name for the Chicago Board Options Exchange’s Volatility Index, a stock index that measures the amount of volatility in U.S. markets using a numerical scale.

Deeper dive: beta

If you want to look at the volatility of an individual stock, you want to find something called its beta. Beta is a measurement of an asset’s volatility and can be found on many stock research websites.

If the beta is less than 1, generally that means the asset is less volatile than the overall market. A beta of more than 1 means it’s more volatile.

Volatility: Why it matters to you

As a long-term investor, you don’t necessarily need to pay special attention to the short-term movements of the VIX, or of a stock’s beta.

However, you should be aware generally of how your investments behave in low and high-volatility environments.

Diversification can help protect your portfolio

Market volatility is part of investing, plain and simple. By staying diversified, you can potentially protect your portfolio from market storms and turbulence.

Put your money in a variety of different investments that are not subject to the same risks and therefore are less likely to share the same fate.

Nobody can foresee the future. It’s impossible to know what will happen tomorrow in the political world, in the economy, and around the globe. It’s also hard to know what fate might befall a certain company or industry.

The best time to invest is today. You can build a diversified portfolio with Stash.

Investing, simplified

Start today with as little as $5

Get the App

By Stash Team

Next for you
Markets Go Down, Don't Panic

Investment Profile

Bonds Worldwide

An International Bond ETF on Stash

Learn more
Explore more articlesChoose a topic to learn more about
Careers budgeting love and money pop culture Technology

This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit