Volatility is one of the biggest risks in investing according to conventional financial wisdom.
A small minority of investors, mostly value investors — a group to which I belong — take a different view. We think it is the probability of permanent capital loss, not volatility, that constitutes the real risk.
Neither perspective is entirely correct. Nor are these the only two viewpoints — one in which volatility is the main investment risk and another wherein volatility is cast as unimportant. Rather, the right question to ask is: When does volatility equal risk?