The journey matters as well as the destination
Imagine two investments beginning at £100 and ending a year at £110. The first moves gradually between £98 and £112. The second falls to £65, climbs to £130 and finally returns to £110. Their start-to-finish returns match, but living through them would feel very different.
Volatility is a way of describing that variation. Statistical measures often use the spread of periodic returns around their average. In plain language, higher volatility means returns have been moving around more.
Volatility is not exactly the same as risk
Large price swings can make losses more likely at an inconvenient moment and can tempt investors into poor decisions. That makes volatility relevant to risk. But it does not capture every danger. A stable-looking investment can still suffer a permanent loss, become hard to sell or hide a risk that has not yet appeared in prices.
Volatility also treats unusually large upward and downward moves as variation. Many investors welcome the upward kind. Measures focused on downside, drawdown or permanent impairment answer different questions.
Time changes what you see
Daily, weekly and annual volatility are not interchangeable. A quiet month does not prove that an asset is normally calm, and a crisis period can dominate a short history. Comparisons should use compatible periods, currencies and return intervals.
Expected volatility can also differ from what was later observed. Options markets contain prices that imply a view of future movement, while historical volatility describes movement that already happened.