10 Useful Phrases to Explain Market Volatility

Long-term returns almost always look impressive. Most financial advisors have an Ibbotson "mountain" chart nearby, showing that large-cap stocks have returned about 10% a year on average over almost the past 100 years. It also shows the historical rate of inflation has been only 2.9%. Investors often invest in the stock market because they want those returns, not quite understanding that the market does not climb upward in a straight line. How do you explain stock market volatility to the uninitiated investor without technical jargon? Common sense is a good alternative approach. It can help create "aha" moments. Let us look at 10 simplified ways to talk about volatility.