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system
what to make of historical stock market volatility?
user
the first thing to realize is that the type of chart you saw is not appropriate for long-term comparisons.  the vertical axis uses a linear scale, where each unit occupies the same amount of space.  this is visually misleading because the relevant information at any point in the chart is "how much is the value going up or down?" and "how much" change depends on how much the value of the investment is at that moment.  for example, if you buy something at $10 and the price changes $1, that is significant, 10%.  if you buy something at $1000 and the price changes $1, that is not so significant, only 0.1%.  the problem in that chart is that 100 dow points occupy the same space whether the dow is at 870 or 10800. to get a better feel for the volatility, you should use a log (logarithmic) scale.  google has an option for this.  using it shows:   in this chart you can see that the volatility appears much less extreme in recent years.  true, the 2006-2009 change is the largest drop, and there might be slightly higher volatility generally, but it is not nearly as extreme-looking.  the drops in 1974 and 1987 can be seen to be significant.
assistant