Volatility
Volatility measures how much and how quickly an investment's price moves up and down over time; higher volatility means larger, more frequent price swings.
Volatility is the most common way to describe investment risk. A stock that regularly moves 3% a day is more volatile than one that usually moves 0.5%. It is typically calculated as the annualized standard deviation of returns, based either on past prices (historical volatility) or on option prices (implied volatility).
Volatility differs by asset. Treasury bills are very stable, broad stock indexes are moderately volatile, and individual small-cap stocks, leveraged products and cryptocurrencies can be extremely volatile. Volatility also changes over time and tends to rise during market sell-offs.
High volatility is not the same as losing money; prices can swing sharply upward too. But it makes outcomes less predictable and can tempt investors to sell at the wrong time. It also matters mathematically: a 50% loss requires a 100% gain to break even.
Example: two funds each average 7% a year, but one ranges from -5% to +20% while the other ranges from -30% to +40%. The second is far more volatile.