Volatility is NOT risk

Key Takeaways: 1.Volatility Isn’t the Same as Risk

• Volatility means prices are changing a lot—up and down.
• Risk is the chance of losing money permanently.
• Just because something is bouncing around doesn’t mean it’s dangerous—it could be an opportunity.

2. Math Doesn’t Tell the Whole Story

• Many investors use formulas to try to predict risk.
• But markets are influenced by people’s feelings, news, and unexpected events—things math can’t fully capture.
• So, relying only on numbers can cause people to miss the bigger picture.

3. Smart Investors Use Volatility to Win

• When prices drop suddenly, good investors look for great companies that are now “on sale.”
• They buy low when others are scared and sell high later when the price recovers.

4. A Real-Life Example: MSTR Stock

• The stock for MicroStrategy (MSTR) went through big price swings.
• Investors who understood this and bought when it was down saw big gains as the price later shot up.

5. Volatility = Growth

• Without price changes, there would be no chance to “buy low and sell high.”
• Volatility keeps the market moving and opens doors for financial growth over time.

Chapters:

Timestamp Summary

0:00 Introduction to Volatility and Misconceptions

0:42 The Math Trap and Harry Markowitz’s Influence

1:57 Flaws of Equating Volatility with Risk

3:17 Limitations of Mathematical Models

4:32 Misinterpretations and AI Overestimations

5:37 Volatility Equals Growth and Investment Examples

8:22 Consequences of No Volatility and Final Thoughts

 

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Phillip Washington, Jr. is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.