Friday, October 23, 2009

Dow Jones Volatility

By Ben Lardes

The Dow Jones volatility over the last year or two has put every investor in a state of panic. Between obvious market crashes, and then the subsequent peaks and valleys along the way, most investors are still not confident enough to comfortably get involved in the stock market because of the fear of loss.

Although many riskier investors have been virtually unscathed by the volatility by, after the crash, investing heavily in risky stocks and making some of their money back, Dow Jones volatility has left a scare amongst investors that will take a while to shake off.

The Dow Jones Industrial Average keeps track of the average of 30 blue chip, industrial stocks and their performance. This average is designed to give you a good idea of how the stock market, in general, is performing.

Volatility describes the up and downturns in the market. Market volatility is measured by the price of a current share and how it increases or decreases in value in any given day. If there are drastic shifts one way or another in a share price, this stock is said to have significant or high volatility, where if it stays relatively the same, it has low volatility.

In an economy like we are now experiencing, there is a high level of overall market volatility, and individual stocks and funds are also experience all time high rates of volatility. The combination of the two leaves investors nervous and uneasy, to say the least.

There is actually an index which charts the market volatility of the Dow, called the Dow Jones Volatility Index. Many individuals and websites are also trying to track and predict what they think will be the future volatility of the Dow Jones. It is impossible to do though, or no one would have lost money in the recent market crash.

Dow Jones volatility has been at an all time high recently, but it is important to note that the recent economic downturn has also shown a more recent upturn, although not returning things to normal; at least it has given some hope to investors. Volatility in markets will always exist, and a good read on overall market fluctuation is by watching Dow Jones volatility.

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