Worried About the VIX Getting Higher? Don't Let It Ruin Your Long-Term Performance
Volatility can be difficult for any investor to stomach, and it's genuinely frightening to see years of savings wiped out by fluctuating asset values. After the tumult in early 2020, many investors are on edge about the impacts of political division, rising COVID-19 cases, and lingering high unemployment. Anxiety might be understandable right now, but investors should take every precaution to remove emotion from their financial decision making. There's a science to portfolio construction and volatility management that should be followed to achieve the best possible outcomes.
The Chicago Board Options Exchange's CBOE Volatility Index, or VIX for short, is one metric that investors use to gauge the level of volatility in the stock market. The VIX jumped above 66 in March 2020, its highest level since 2008.
The VIX opened November 2020 at 37 and has since dropped to 23.5. This is actually among the lowest levels since February, but still meaningfully higher than the average daily closing values that have generally hovered in the 15 to 17 range for the past decade. It is certainly fair to say that volatility is elevated, but it is far below crisis levels. Fearful investors should find some solace in that fact.
Source Fool.com
