Investing glossary
Volatility
Volatility measures how much and how often an asset's price swings: a highly volatile asset can rise or fall a lot in a short time, while a low-volatility one moves more smoothly.
Volatility should not be confused with poor returns: an asset can be very volatile and still offer a high expected return over the long term (equities, for example, are more volatile than bonds but historically return more over long horizons).
Volatility matters mainly in relation to your time horizon and emotional tolerance: the shorter your horizon or the less tolerance you have for seeing your portfolio drop, the less volatility you should take on, usually by combining equities with more stable assets.