Volatility vs Risk

Volatility vs Risk

In our previous CH Minute, we looked at segregated funds and how they mitigate risk. This week, we focus on the topic of risk, but also look at volatility and how they differ.

What is volatility?

Volatility can be described as the degree to which a stock’s price fluctuates. During volatile periods, the price may swing sharply up and down while less volatile periods see a more smooth and predictable performance. The question we need to ask is how much of this volatility represents a long-term risk in any given investment?

By way of analogy, we might think of a mutual fund as a sailboat sailing across two different bodies of water. When sailing on a lake’s smooth waters the ride is less choppy, this is our less volatile period. Conversely, a more volatile period is like sailing on the ocean where the waves can get much higher and passengers are much more aware of ups and downs experienced by the boat.

The issue, however, is less on the size of the waves, and more on the quality of the boat, and of the crew that operates it. A strong boat manned by a skilled crew is in less danger than one with holes in the hull and an inexperienced crew.

So, what is risk?

Although there are many types of risks to consider, risk can be defined as a permanent loss of capital. In other words, it isn’t the bumpiness of the ride that will harm investors, it is the sinking of their investments to a point where they will not be able to recover.

As advisors, our duty is to gauge a client’s time horizon and tolerance for risk and then create a portfolio suitable for them. Going back to our analogy, we build the boat to your specifications that you will then ride to your financial goal. We know there will be big waves at times, but the trip will rely on the boat and its crew.

A client that is retired and needs income from their investment portfolio might be less interested in the excitement of the markets and more about the safety. Meanwhile, a younger person knows they need to build their wealth. This means making sure they have an investment portfolio that can withstand the winds and waves of market volatility.

When is volatility the same as risk?

If an investor knows they will need “X” amount of money in a short period, a sudden market downturn could do a lot of damage. Safety and low volatility will be needed and is therefore much more important than the return. In this scenario, volatility and risk are the same.

Likewise, a sudden market downturn that causes an investor to sell out of fear leads to a permanent loss of capital. They cannot make back their losses because they have exited the market. Here again, volatility and risk are the same thing.

For us at CH, we encourage clients to stay invested and make sure that the funds they own are solid. In these cases, market downturns are merely paper losses. If they do not sell then they haven’t lost anything, and their portfolio will enjoy the fruits of the market recovery. No one knows how long the storm will last, but we do know that it will end. This is how our clients have continued to prosper even though they have experienced temporary paper losses from time to time.

Managing volatility

No one can stop markets from going up and down. The only way to manage volatility, and not let it turn into risk, is through patience. As the old saying goes, stay invested for the long term. We at CH would add “stay invested for the long term in the right funds.” The right mix of funds may vary from client to client, therefore we use multiple funds and strategies. By understanding our client’s tolerance for risk and volatility, how much return they need to make, and how long they have to make it we can build the right kind of portfolio for them.

Most importantly, we emphasize staying invested during downturns. Volatility isn’t necessarily a bad thing. Research shows that missing only the 5 best days in the market in the last three decades would have led to a 33% lower return for an investor. Being out of the market for the 10 best days during this same period would have led to a return being reduced by 49%.

In other words, if you can, stay invested.


This edition of the CH Minute has sought to show the difference between risk and volatility. They are not always the same thing. Dips might be small, like the one we just had in September, or they may be larger, like in March of 2020, but in each case, we have seen our portfolios recover. Therefore we thought this would be a good time to discuss volatility. If you’d like to discuss volatility or risk further, please don’t hesitate to reach out to your advisor.

As always, we welcome any questions or comments.


All the best,

Devin Gorgchuck, Financial Advisor

& Your CH Financial Team



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We’re looking for aspirational clients who require the whole spectrum of financial services because managing the whole is how we’re able to deliver unbeatable value – it’s our “secret sauce.”If this describes you, let’s set up a meeting andget to know each other.

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I just want to say we have been with your team since 1993, and we have never had any bad advice. The investments you set up for us during this time has paid for university education for our two granddaughters and provided a significant monthly income for us to augment our pensions.

We are with you for the long run and are not going anywhere. Jeremy has told us that at these times the numbers tend to scare you, but you haven’t really lost anything if you don’t panic and sell.

Ken M, Calgary

With CH Financial since 1993

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When I became a client of CHF it was a real game-changer as I was going through a very difficult time both professionally and personally.

I went through a divorce and the loss of a job and a parent, all within a 12-month period. While it was very tough to deal with at the time, I was reassured by the fact that the team at CHF had my back and really cared about me and what I was going through.

Looking back now, I’m not sure how I would have managed without the support of the CHF family.

Jeremy and his team were there every step of the way to help me navigate my way through the complexities of a divorce and inheritance. They got me back on track both financially, as well as emotionally.

I have now been a client of CHF for over 10 years and thanks to their expertise, I know that my family will be well taken care of for many years to come. I am now in a position where I don’t need to worry about money thanks to a solid financial plan.

I would highly recommend the CHF team to others going through life-changing and difficult situations as your financial partner.

Linda, Victoria

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As an investment industry professional, I am constantly on the go and maximizing my peak career earning years in my 40s. With travel and work commitments I am very limited for time to spend with family and do the things I love to do and chose CH Financial to allow me more freedom and lifestyle balance.

Being in the investment industry my whole career and an extremely busy professional, I know I could probably do a good job at managing my money as I work in the industry after all while I rely on and trust the CH Financial team that they will take care of the details, both growing my assets as well as taking care of every aspect of my financial situation, including my tax, investments and insurance, they simply take away the stress of having to worry about it all and help me to navigate the complexities for me so it all meshes together and importantly saves me valuable time and headaches.

At the end of the day, the reality is I truly value my time and the opportunity cost of my time and would rather hire the best in the industry so ultimately my wife and I can do the things that we love to do, have more leisure time, relax and enjoy spending time in the great outdoors, exploring new countries, hiking in the mountains and volunteer work.

Since engaging CHF more than 5 years ago we have enjoyed significant growth in our investments but more importantly, we have peace of mind and sleep much better at night knowing the team at CHF has our financial back and anything financial they will take care of for us.

I would have absolutely no hesitation in recommending the team at CHF to other career-focused busy professionals who really value their time and lifestyle balance.

Kevin & Sharron, Calgary

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Prior to joining CH Financial as a client, I had been partially managing our investments and using a bank-owned broker for many years, with moderate success. When we became clients of CHF, I quickly realized how little I knew about the complexities of managing investments and the importance of seeking out the best specialists in the industry to assist with my family’s full financial picture.

Brian and the team at CHF encouraged us to take an introspective look at our assets and expenditures and even helped us implement a comprehensive budget. The team really stepped up to take care of all aspects of our financial picture, including portfolio design, CH Financial introduced us to a lawyer who took care of everything for us, estate planning and tax, while helping us simplify our financial affairs.

Being of the sandwich generation my wife and I spend considerable time caring for our surviving parents and our grandkids, so

freeing up valuable time is essential to allow us to do the things we love to do. The team at CHF takes care of the details and today my wife and I enjoy a comfortable, stress-free financial situation.

Over the years as a client of CHF, both our portfolio and wealth has grown exponentially, more than we could have ever imagined. Now that we are both happily retired, having the CHF team in our corner helps us to sleep better at night knowing that our somewhat complex financial puzzle is being looked after by a team of people that really care, as opposed to being treated like a number by a big bank.

I would have no hesitation in recommending the CHF team to others looking for a superior financial home in Calgary and a safe place to invest your hard-earned money.

Ian C, Calgary

Comfortably retired thanks to CH Financial