Some of the worst-performing portfolios in history appeared calm right up until they failed. Low volatility is comforting. It signals control, stability and professionalism. For advisers and investors alike, smooth returns feel synonymous with safety. Yet experience suggests the opposite can often be true. Portfolios that appear least volatile are not necessarily those that carry the least risk. In many cases, they are simply the most fragile.
Crucially, volatility does not capture: • the depth of potential drawdowns, • the timing of losses, • liquidity under stress, • correlation breakdowns, • or the behavioural responses those conditions provoke.
