We’ve created the following quiz to help investment professionals and their clients gain an improved understanding of market volatility and to help improve their knowledge of what investment strategies are available to help manage it.
True or False: Market volatility typically measures how much equity markets go up and down for different periods?
What asset classes generally have more market volatility, equity or fixed income?
True or False: There are strategies that allow investors to participate in equity market returns, but do so in a lower-risk way through the ownership of certain types of equities.
Are US or International equity markets generally more volatile?
Are investment strategies designed to help decrease the potential effects of volatility used only by retail investors, or do institutional use them too?
Is there a difference between low volatility and minimum volatility investment strategies?
True or False: Some lower volatility strategies can offer enhanced diversification to investors, in addition to offering them potentially lower risk than an index.
Does the Chicago Board Options Exchange Volatility Index® (VIX)8 measure historical US equity market risk or does it measure what is expected by experts in the near term?
2 Standard deviation is a measure of the distribution of a set of data from its mean, or average value.
3 An exchange-traded fund, or ETF, is a marketable security that tracks an index, commodity, bonds, or a basket of assets like an index fund. ETFs trade like stocks, are subject to investment risk, and will fluctuate in market value. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than the ETF's net asset value.
4 The S&P (Standard & Poor's) 500 Index is an index of 500 stocks often used to represent the US stock market.
5 The MSCI EAFE Index is a stock market index designed to measure the equity market performance of developed markets outside of the U.S. & Canada. EAFE stands for Europe, Australasia, and Far East.
6 The MSCI Emerging Markets Index consists of 23 countries representing 10% of world market capitalization.
7 Risk-adjusted return refines and investment's return by measuring how much risk is involved in producing that return, which is expressed as a number or rating. Risk-adjusted returns are applied to individual securities, investment funds, and portfolios.
8 Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.
Volatility management techniques may result in periods of loss and underperformance, may limit the Fund's ability to participate in rising markets and may increase transaction costs.
This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed above may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted.
All investing involves risk, including the risk of loss. Diversification does not guarantee a profit or protect against a loss.
Fixed income securities may carry one or more of the following risks: credit, interest rate (as interest rates rise bond prices usually fall), inflation and liquidity.
Equity securities are volatile and can decline significantly in response to broad market and economic conditions.