The tendency of a security to rise or fall sharply within a short period. Volatility
is a traditional worry for investors, and is associated with fast-growing stocks,
high P/Es, smaller companies, technology-based firms, and thinly traded issues.
The most widely used measure of stock volatility is the beta coefficient. Companies
that tend to be less volatile include those with a solid record of healthy dividend
payments, large companies in stable businesses such as food and other consumer products,
and companies in slow-growth industries. You can reduce the volatility of your portfolio
through clever diversification. Some commentators consider volatility overrated
as a concern for younger investors, who have the time to hold on through thick and
thin. If you're investing for the long-term, after all, what are some bumps in the
road as long as you get where you're going?