Why Buffett believes volatility is not risky

Volatile does not mean risky, irrespective of what your investment guidebook might be saying. At least, according to the greatest investor of our time, Warren Buffett. Finance academia firmly believes that if a stock is highly volatile, it is a risky investment. They measure this risk using the beta, a metric that shows the volatility of a stock's price compared to the volatility of the overall market. And according to them, the higher the beta, the riskier the stock. However, Buffett disagrees. In one of his many rewarding seminars, he said, "A wildly fluctuating market means that irrationally low prices will periodically be attached to solid businesses. It is impossible to see how the availability of such prices can be thought of as increas

This article was originally published on May 18, 2023.