Final answer:
If an investment is considered volatile, it means the value of the investment may be hard to predict due to frequent and significant price changes. Investing in stocks often entails dealing with volatility, where there is potential for high returns over time but also significant risks in the short term. Speculation is closely associated with such high-risk, volatile investments.
Step-by-step explanation:
If an investment is considered “volatile”, it means the value of the investment may be hard to predict. Volatility refers to the frequency and magnitude of the investment's price fluctuations over a short period of time. High volatility indicates that the price of the investment can change dramatically in either direction in a very short period, which makes it unpredictable.
Investing in stocks is a common example of entering a volatile market. While the rate of return over time can be high, the risk in the short term is significant. It's essential to make a distinction between the potential for high returns and high volatility since they are related but different concepts. High returns refer to the possible profits one can gain from an investment over a long period, whereas high volatility signifies the unpredictable nature of an investment's value in the short term.
Speculation is another term associated with high-risk and volatile investments. Investors who engage in speculation are often looking for quick, high payouts that come from market fluctuations. Nevertheless, such strategies come with increased risk, which means the potential for both high rewards and high losses.