This Volatility Is Off the Charts!

etf-news7The Motley Fool community is weighted toward investors, as opposed to traders. As such, it has been hard for many of us to stomach the constant drumbeat of the financial media’s daily mantra that “buy-and-hold is dead.”

Whether they surface on CNBC, investing websites, or blogs, these diatribes generally focus on the trailing 10-year period, an admittedly tough one for stock returns. But they make it sound as if each of the past 10 years, rather than just the last 20 months, has been straight downhill for long-term investors. And they ignore the brutal past six months we long-term investors have endured, which have simultaneously provided more speculative traders with the closest thing to paradise-on-earth they’ve likely ever seen.

As if we were not in the midst of a stupendous singularity
In fact, our current level of volatility is unprecedented in most of our lifetimes. According to Yahoo! Finance, which lists high-low-close data for the S&P 500 index going back to March 1950, the average daily change in the value of the index over the previous 60 years has been a tad less than 0.6%. In 2006, it was 0.5%. In 2007, it was 0.7%.

In 2008, the average daily change in the value of the S&P index was 1.7%.

This is a huge variation: 300% of normal volatility, on average, day in and day out, for a year! Given the staggering trading volume of highly liquid (and relatively new) exchange-traded funds, this may not come as a surprise. After all, Proshares QQQ Trust (Nasdaq: QQQQ), SPDRs (NYSE: SPY), and the iShares Russell 2000 (NYSE: IWM) do more than 70 million shares per day in trading volume

Full Story: http://www.fool.com/investing/general/2009/04/24/this-volatility-is-off-the-charts.aspx

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