This stock market wisdom is based on the idea that it is riskier to invest in stocks that are more volatile, or have bigger swings in price. This is because when a stock is more volatile, it is more likely to experience a large drop in price, which could result in a loss for the investor. Additionally, stocks that are more volatile are also more likely to be less stable in general, which means they may be more likely to experience significant price changes over time. As such, investors who are looking to minimize risk may want to avoid investing in stocks that are highly volatile.
There are a few reasons why investing in more volatile stocks may be riskier. First of all, as mentioned, these stocks are more likely to experience bigger swings in price. This means that there is a greater chance that the stock will drop significantly in price at some point, which could lead to a loss for the investor. Additionally, volatile stocks tend to be less stable overall, which means that their prices may change more frequently over time. This can make it difficult to predict what the stock will do in the future, and make it more likely that the investor will experience losses.
Overall, then, investing in more volatile stocks is generally considered to be riskier than investing in stocks that are less volatile. This is because there is a greater chance that these stocks will experience significant price changes, which could lead to losses for the investor. If you are looking to minimize risk in your investment portfolio, you may want to avoid investing in stocks that are highly volatile.
