when markets are volatile you may have trouble selling or buying an asset within your price range especially when you need to exit a position in a hurry if the market is crashing liquidity may be difficult no matter what type of stocks you buy under more normal conditions though you can maintain your liquidity by sticking with stocks that have low impact cost the cost of a transaction for that stock to make trading easier 
some industries tend to do well even when the overall economy is poor these tend to be utilities and businesses producing consumer staples that s because no matter what the economy is doing people still need to turn their lights on still need to eat and still need toilet paper and toothpaste by keeping some of your money in staples you can still see returns in a recession or a period of high unemployment no matter where you invest your money it is impossible to fully escape market risk and volatility but you can manage this risk and escape much of the impact of volatile markets by using a long term investing strategy you may want to make small tweaks in response to changes in the market but don t upend your entire investing strategy because a recession hit or a currency changed value in general short term traders are more impacted by volatility by contrast over time volatility tends to even out over time by approaching your investing systematically and sticking with a long term outlook and strategy you are more likely to see your portfolio bounce back from the impact of market risks measuring market riskto measure market risk investors and analysts often use the value at risk var method var modeling is a statistical risk management method that quantifies a stock s or portfolio s potential loss as well as the probability of that potential loss occurring while well known and widely utilized the var method requires certain assumptions that limit its precision for example it assumes that the makeup and content of the portfolio being measured are unchanged over a specified period though this may be acceptable for short term horizons it may provide less accurate measurements for long term investments var is a statistical measure that calculates the maximum potential loss a portfolio could experience over a given time period at a certain level of confidence so a var of 95 suggests that there is a 95 chance that the portfolio would not lose more than the calculated amount over the given time period the equity risk premium erp is a measure of market risk that reflects the excess return that investors demand for investing in stocks over and above the risk free rate of return in other words it is the implied additional compensation that investors require to hold an investment in the broader stock market which is inherently riskier than holding a risk free asset like u s treasuries the erp is calculated by subtracting the risk free rate of return usually the yield on a short term or midterm government bond from the expected return on the stock market for example if the expected return on the stock market is 10 and the risk free rate is 2 the erp would be 8 the difference between the broader market risk premium mrp and the equity risk premium comes down to scope the erp is specific to the stock market while the mrp is the additional return that s expected on a diversified portfolio of investments held among various asset classes that is above the risk free rate beta is another relevant risk metric that measures the relative volatility or market risk of a security or portfolio compared to the market as a whole it is used in the capital asset pricing model capm to calculate the expected return of an asset a beta of 1 0 indicates a stock has market risk identical to the broader s p 500 while a beta greater than 1 means that the asset is more volatile than the market beta can be used to estimate the market risk of a portfolio by calculating the weighted average beta of its constituent assets 