Finance 101

Performance and volatility

April 5, 2019


Performance and volatility

Finance 101

How to understand market volatility

A lot of novice investors shy away from risk. They get scared by big swings in market volatility — which is understandable, but also strange when you think about it. After all, those big movements are the source of a lot of investment returns! Where there is risk, there is often a big reward.

Now, there are good reasons for an investor to minimize risk: for instance, a young home buyer who doesn’t want to take the chance that their assets will diminish just as they are cashing out their downpayment. Or, imagine someone just a year or two from retirement who is wary of a significant market correction. For these types of investors, taking a risk-averse approach isn’t necessarily a bad thing.

But for many other investors, big market movements offer opportunities to invest when assets are undervalued — and then reap a potential big return when those assets go up. It’s the old “buy low, sell high” phenomenon.

Thanks to Visual Capitalist, here’s a quick rundown on what volatility means, how it has affected markets historically, and how savvy investors use the ups and downs of the market to their advantage.

At CI Direct Investing, we offer a long-term approach to investing and diversified portfolios that aim to reduce volatility while providing better risk-adjusted returns. Check-out our portfolios and talk to a financial advisor to see what’s right for you.

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