What is market volatility?

As you know, stock prices are constantly going up and down. They can either make drastic swings in one direction or small movements. This is called volatility.

The volatility of a specific instrument may vary. Depending on the asset class, some may experience rapid price movements, while others not so much. In general volatility depends on a lot of factors like economic and company specific events.

Economic events like raising interest rates, monthly job claims, non farm payrolls, etc. have always caused volatility. At the beginning of the event day, just before the event and during the even is when the market is most volatile. The same goes for company specific events for a stock. Even just the announcement of a special event by a company can cause some volatility in the stock price.

Volatility may cause wild swings in the price of stocks, leading to uncertainty, however, there is a silver lining. Unexpected results can bring great opportunities. This is exactly how seasoned investors buy major company shares at a discount. Being prepared for a volatile market is key to acquiring the stocks you desire at a better price and improve the overall value of your portfolio.