What Volatility Truly Means

What Volatility Truly Means South Park Capital

Nowadays, the word “volatility” seems thrown around more than ever. Usually, when it comes to financial talk, “volatility” is used to describe a downward trend. But that’s not what volatility really means! Volatility is technically referring to large up and down swings in the market over short periods of time. It doesn’t just mean a downward trend.

The Ups and the Downs

It’s important to make sure your financial plan is protected against downward trends. When markets are smoothly climbing, it can seem as if there is little danger involved in holding risky assets in your retirement portfolio. But suppose you don’t stay vigilant on how your risk tolerance is reflected in your investments. In that case, your risky assets could grow during smooth economic periods to become an oversized part of your portfolio. Then, when the markets eventually take a downturn, your accounts could be at greater risk of declining steeply in value.

That’s if a downturn happens… But what about true volatility? What about when markets jump one week and tumble the next? It can make you feel like one week you need to be more conservative and the next, more aggressive. If snappy headlines and emotions are getting the best of your strategy and you find yourself constantly rebalancing, you could incur high fees and end up selling when markets are low and buying when markets are high. All in all, this is an inadvisable plan, let alone a plan at all.

The Value of a Plan

Riding the markets by the seat of your pants is not a portfolio strategy that can consistently provide what you need in retirement. Instead, it’s crucial to ask yourself the following questions:

  1. Assess your retirement finances now.
    1. How much do you have saved?
    2. How much do you plan to have saved in retirement?
  2. Assess your costs.
    1. How much do your basic needs cost?
    2. How much do you think they will cost in the future?
  3. Assess how much income you will need to cover your basic costs.
    1. Based on your costs, how much will you need now and, in the future, to comfortably cover them?
  4. Assess your risk tolerance.
    1. How much will go towards providing you a stable income that covers your costs in retirement?
    2. Based on that number, how much are you willing to put towards riskier, higher-growth assets?
    3. If you’re not retired, how much more do you need to meet your retirement goals?

This set of questions only scratches the surface of how you can thrive through retirement without worrying about everyday market swings. Healthcare costs, tax strategy, multiple sources of income, where you live, what assets you currently have and how liquid they are, and many other factors, all influence how your ideal retirement plan can be sculpted. But that’s easier said than done. Talk to us today to take the first step in helping you get your retirement plan on track.


Securities offered through Arkadios Capital, LLC (Member FINRA and SIPC).

Past performance does not guarantee or is indicative of future results.  This summary of statistics, price, and quotes has been obtained from sources believed to be reliable but is not necessarily complete and cannot be guaranteed.  All securities may lose value, may not be insured by any federal agency and are subject to availability and price changes.  Market risk is a consideration if sold prior to maturity.  Information and opinions herein are for general informational use only and subject to change without notice.

This material does not constitute an offer to sell, solicitation of an offer to buy, recommendation to buy, or representation as the suitability or appropriateness of any security, financial product or instrument, unless explicitly stated as such.  This information should not be construed as legal, regulatory, tax, personalized investment, or accounting advice.   This message (and any attached materials) is for the sole use of the intended recipient(s) and may contain information that is privileged, confidential and exempt from disclosure under applicable law. Any review, dissemination, distribution or duplication of this communication is strictly prohibited. If you are not the intended recipient, please contact the sender immediately by reply e-mail and destroy all copies of the original message.

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Addressing Market Volatility in Today's World
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Addressing Market Volatility in Today’s World

Planning for retirement is never a “set it and forget it” task. There are unexpected disasters, market drops, and changing laws that could cause retirees to reevaluate their financial situation. Ultimately, there’s no way to predict everything that will cause market downturns. However, you can prepare yourself for one by having a solid financial strategy […]

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