S&P 500 Monthly Volatility Analysis From 1893 to July 2025Most of the time, the S&P 500 is seen as a low-volatility index when compared to most individual stocks, small-cap indexes, or indexes from other countries.
However, most investors don't know exactly what volatility to expect from a statistical perspective.
The Risk Distribution Histogram allows us to understand exactly how risk is distributed.
S&P 500 Statistical Risk Distribution
Here are some highlights from what we get from the analysis. Some of this data might actually surprise investors. The data is monthly:
27% of all months have volatility under 0.68%
80% of all months' volatility was under 4.79%
5% of all months had a volatility of over 7%
If we can call a volatility over 25% a severe crash or "grey" swan, we had 7 of those events
3 months with extreme volatility over 30%
This allows us to understand tail risk and plan ahead. While most times the S&P 500 is in the low volatility zone, extreme events can happen.
What can we learn from this?
Prepare for rare but possible high-volatility events.
Understand the 80/20 rule. Most months are very low volatility, but 20% of them will have a volatility higher than 5% approximately.
Avoid overconfidence in stability
Plan for long-term horizons. High volatility tends to "dissipate" in the long term.
This is why it's important not to discard rare high-volatility events, especially when the investor is in need of liquidity.
This risk analysis can be done for any ticker.
