What does volatility in investments refer to?

Volatility in investments refers to the rate of fluctuation of an investment's value over time. This concept is crucial for investors as it indicates the level of risk associated with a particular investment or market. High volatility means that the value of the investment can change dramatically in a short period, which might present opportunities for significant gains but also increases the potential for considerable losses. Conversely, low volatility implies that the investment's value is more stable, with smaller fluctuations typically observed.

Understanding volatility helps investors assess risk and make informed decisions about their investment strategies. By being aware of how much an investment's value can vary, they can weigh their risk tolerance against potential returns. This definition aligns with option B, making it the correct answer. The other options focus on aspects like stability, historical performance, and total return, which do not directly describe the concept of volatility.