The Mysteries of Volatility and Risk
By Karl Steiner
I don’t often write about “volatility” here at Mindfully Investing because mindful investors focus on long-term returns more than the routine ups and downs of the markets. The standard deviation of return sequences is the most common measure of routine volatility for stocks, bonds, and other asset classes. But as I explained in a previous post, standard deviation is actually a poor measure of the potential for a
permanent loss, which is the risk that matters most to real-life investors. A permanent loss is when your invested money is not available at the time you expected to spend it, such as when retirement begins.