Understanding the 'fear index' in the stock market

• The VIX measures the stock market's blood pressure by gauging investors' fear.
• When investor concerns increase due to events such as the Federal Reserve raising interest rates or the Covid-19 pandemic, the VIX can experience a spike.
• Investors can use the VIX to help them make buying and selling decisions.

The VIX measures the stock market's blood pressure by gauging investors' fear.

When investor concerns increase due to events such as the Federal Reserve raising interest rates or the Covid-19 pandemic, the VIX can experience a spike.

Ally Financial's chief markets and money strategist, Lindsey Bell, stated on CNBC that the tool they use to measure the concern is unique and can be quantified.

The VIX is a measure of future volatility in the S&P 500 stock market, calculated using options trading activity.

According to Jason Snipe, founder and chief investment officer at Odyssey Capital Advisors, the VIX is measuring implied volatility over the next 30 days, which is derived from option activity. This is the driving force behind the VIX's movement in either direction.

Investors can utilize the VIX to inform their investment decisions or they can invest in it indirectly.

According to Tiffany McGhee, CEO and chief investment officer of Pivotal Advisors, the key to successful investing is having a plan, regardless of whether you are a trader or an investor.

The VIX measures fear, and understanding the mechanics behind implied volatility is crucial for managing investor portfolios.

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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.