![]() If an investment is said to be volatile it can be unpredictable, and the value can change very quickly, whereas less volatile investments may be more predictable.Īn investment fund that shoots up 20%, before falling back to make a 12% gain over 12 months, would be considered far more volatile than the one that makes 12% over a year by simply gaining 1% each month. The greater the variance, the higher the volatility and it follows, the riskier the investment is deemed to be. Variance implies the movements in price could be both negative and positive. This can be calculated using the standard deviation of returns. Volatility in investments looks to quantify the variance in returns you can expect from an investment, In other words, how much does the price of an investment move around. Whilst there are many more investment risk metrics that we consider, we’ll look more closely at volatility and maximum drawdown. By using these consistent approaches, we can determine if one investment is more or less risky than another for that specific aspect. When looking at investments we can try and categorise risks by measuring certain aspects of behaviour. The rollercoaster that offers just the right dopamine hit for the adrenaline junky, can be the source of stress for the less adventurous. ![]() As personalities differ so too does an individual’s attitude towards, or desire, of risk. Risk, along with return, is something we all associate with investments.įor individuals, risk can mean different things, it invokes very personal feelings and because of this it is very difficult to define or quantify.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |