Stock market volatility is how much a stock price fluctuates, and it can be a good or bad thing for investors. It often reflects how investors respond to new information, especially when that information creates uncertainty.
For example, if an economic report shows that inflation, consumer spending or manufacturing output is stronger than expected, it may cause stocks to shift in response. Likewise, if a company’s quarterly earnings miss expectations or if management changes its outlook for the future, that could also shift stock prices.
Global events, such as political unrest in a major country or an earthquake that causes supply chain disruptions, can also impact share prices. This is because those events typically affect multiple countries at the same time, and it’s harder to know how they’ll play out or what effects they’ll have on the economy.
Some people get scared by market turbulence, which can lead them to sell off their investments and dramatically change the allocation of their portfolios. That’s a mistake because it’s hard to know when the markets will recover, and it means missing out on potential gains. Instead, try to stay disciplined and stick with your investment plan. A diversified portfolio can help manage market volatility because it includes a mix of stocks and bonds, which tend to be less volatile than stocks on their own. And dollar-cost averaging, which involves investing a fixed amount of money at regular intervals, can help you avoid erratic buying and selling.
About the Author
