Is Volatility Your Friend or Foe?

Nowadays we are experiencing that the #Market is heading up and down frequently resulting in up and down in the portfolio #Valuation.

First of all, we will discuss what #Volatility is. There is a big misunderstanding that volatility means downfall. Whenever the market gets corrected, people start speaking about volatility.

To understand this, we need to know the various phases of the market.

1. Volatility
2. #Correction
3. #Bear Market
4. #Recovery
5. #Bull Market

Volatility is defined as the rate at which the price of a security increases or decreases for a given set of returns. I am not defining this phenomenon as any phase in the market because it happens within each phase and is a part of it.

We often take the volatility for granted, just like this chart. All three folios have different #RollingReturns, but the final arithmetic average return is 10%. We often use this type of dataset for showing the difference between what the #Investor thinks and how the #Market keeps changing.