# How does Volatility work?

Volatility refers to the fluctuation of returns around the average. It can be used as an indicator of risk. The higher the volatility, the greater the chance that your return will change significantly in a short period of time.

Volatility can be expressed and interpreted in different ways:

**Low volatility**: This means that the return is relatively stable with small daily fluctuations. Mainly aimed at investors who prefer stable and predictable returns. For example, a bond is a security that usually has low volatility. These securities are often considered safe and usually show little volatility between 2% and 5% per year.**High volatility**: This means that the return fluctuates considerably with large daily peaks. Mainly aimed at investors who are prepared to accept more risk. Securities where a company does not yet make a profit, but still runs on a promise, are often known for their high volatility. These securities can react strongly to news, market sentiment, and company results, which can lead to significant volatility.

In addition to volatility, we also display the Beta of your portfolio. In essence, **Beta measures the sensitivity of your portfolio to an index**, while **volatility refers only to the degree of return fluctuation**.

### How is volatility calculated?

We determine the volatility in your portfolio by calculating the standard deviation of your daily return percentages within the period you select. To make it easier to compare different periods, we convert this to an annual volatility with an average of 252 trading days.

Annual volatility = Daily volatility (standard deviation) x √252