Editor's Note: This story originally appeared on Boldin.
Lately, financial confidence feels wobbly. Headlines shift daily, and many Americans feel the threat of uncertainty.
Wouldn’t it be nice to have a crystal ball to tell you where the market is headed next? Well, the Volatility Index, or VIX, can provide some short-term clues.
Find out what it has to say about the future and how to use it in your own retirement planning.
What Is the Volatility Index (VIX)?
The Volatility Index, formally known as the Chicago Board of Exchange Volatility Index and VIX or CBOE VIX for short, is a gauge that measures how nervous the markets are.
More specifically, it tracks how much investors expect S&P stock prices to fluctuate over the coming month. It’s sometimes called the “fear index” because it reflects investor uncertainty and perceived risk in the short term.
But it’s important to understand what the VIX doesn’t do. It doesn’t predict future market direction or say whether stocks will go up or down.
It simply reflects how much movement investors expect.
How Does the VIX Work?
The VIX is calculated based on S&P 500 options trading. These are financial instruments investors use to hedge or speculate on future market moves.
When there’s more demand for options (especially protective ones), it’s a sign investors are bracing for turbulence.
You can track the VIX here.
What Is a Normal, High and Low VIX?
Over the last 15-20 years, the VIX has averaged at around 18-19. The most extreme readings occurred during events categorized as financial crises. In March 2020 (the COVID crash), the VIX was over 80. In the 2008 financial crisis, the VIX soared to over 90.
More recently, April 2025 showed some degree of volatility around the on-again, off-again tariffs. During that month, the VIX was mostly in the 30s, climbing to a high of 52.33 on April 8.
- A lower VIX (typically under 15) suggests investors see a calmer, more stable outlook.
- A higher VIX (typically above 20) means markets expect greater volatility — more price swings, more uncertainty.
- A high VIX (typically 30 and over) can indicate that the market is highly volatile and there may be some extreme swings soon.
How to Use the VIX
The VIX can be a good indicator for how nervous investors are. However, most people should think of the VIX as interesting information, not a call to action.
While there is an adage that says, “when the VIX is high, it’s time to buy,” it’s probably not a measure to be used by amateur investors to determine buy and sell strategies. Buying when the VIX is high is a contrarian strategy that suggests buying stocks when the VIX is elevated.
Instead, your overall asset allocation and buy-and-sell decisions should probably be determined by a long-term strategy focused on achieving your goals, not on any one short-term index. Your investment strategy should be driven by your personal goals, time horizon, and risk tolerance — not a short-term measure of market nerves.
Learn more about building an investment policy statement, a document defining your investment goals, strategies for achieving those objectives, a framework for making changes to your plan and what to do if things don’t go as expected.
How to Prepare Your Retirement Plans for Market Ups and Downs
The best thing to do if the stock market falls (or rises) is to stick to a plan. You don’t need to predict the future. You just need a plan for whatever the future holds and to:
- Stress test your plan with optimistic, average, and pessimistic return assumptions.
- Model different market conditions for your plan.
- Run simulations to understand the likelihood of success under volatile scenarios.
- Build flexibility (different sources of retirement income and a budget that increases spending in good times and scales back to just the necessities when markets are underperforming) into your financial projections.
You can use the Boldin Planner to do all that. And most importantly — stick to your strategy. The best offense against market uncertainty is a solid, forward-thinking defense.
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