THE GLOSSARY · RISK
Volatility
Two investments, the same average return: the one that zigzags more is the more volatile. That is not your risk of losing, it is the price of the ticket.
By the Yoseri News desk · · 1 min read
Two investments post the same average return. One climbs and falls quietly, the other zigzags. The second is the more volatile — and that is exactly what volatility is: how widely an investment swings around its average, measured as an annualised percentage.
It is not your enemy. It is the price of the ticket: without it, no return above a savings account. Your real problem is elsewhere — at equal return, the higher it runs, the deeper your drawdowns, and the more nerve it takes not to sell at the worst moment. It is almost never the maths that fails you. It is the nerve.
The order of magnitude changes everything. A diversified equity portfolio moves in a far narrower band than a crypto-asset whose annualised volatility runs past 60%. On an asset like that you need several years of data before you can tell a trend from plain noise — which is why an honest model shows you low confidence rather than a prediction.
In Yoseri, you find your annualised volatility on the Investments page, with the history available and the history it would take. When the second exceeds the first, the confidence shown is low.
Where the figures come from
The maths in this article starts from the assumptions written above. Run them again with your own figures — you should land on the same numbers.
Yoseri News is an educational publication. Nothing in this article is investment advice, a recommendation to buy or sell, or tax advice. Yoseri is registered as neither an adviser nor a dealer with any market authority.