In early April 2025, the financial world turned its eyes toward an old but telling number: the VIX, often dubbed the “fear gauge” of the stock market. Triggered by mounting concerns over renewed tariff tensions between the United States and several major trading partners, the VIX surged to its highest level in five years. For many, the spike sounded alarm bells. For others, it served as a reminder that markets are unpredictable, but planning for that unpredictability can make all the difference.

Let’s explore what the VIX actually is, what it tells us – and more importantly, why knowing your own personal volatility tolerance is a better compass than any number on a screen.

What Is the VIX?

The VIX, or Volatility Index, was introduced by the Chicago Board Options Exchange (CBOE) in 1993. It measures the expected volatility of the stock market over the next 30 days, based on the prices of options on the S&P 500. When traders expect big swings – up or down – they tend to buy more options, which drives up the VIX.

• A low VIX (generally under 15) signals investor calm and relatively stable markets.
• A high VIX (above 30) suggests that traders anticipate large moves, usually during times of uncertainty or panic.

The index hit extreme highs during events like the 2008 financial crisis and the early months of the COVID-19 pandemic. Now, in 2025, worries over new tariffs – particularly those affecting tech and consumer goods – have reignited concerns about trade wars, supply chain disruptions, and global economic growth, pushing the VIX past 35 for the first time since 2020.

How to Interpret the VIX

The VIX doesn’t predict the direction of the market – it merely reflects how turbulent investors expect the ride to be. Think of it like a weather forecast: it can’t tell you whether your weekend hike will be canceled, but it can tell you whether to bring an umbrella.

• Short-term traders often use it to hedge risk or time their trades.
• Long-term investors, however, should see it more as a barometer of mood, not a signal to panic.

Why Your Volatility Tolerance Matters More

The VIX is a number, but you are not. While it’s useful to know how jittery the market is, it’s even more important to know how much volatility you personally can withstand.

Some investors see a 5% market dip and feel anxious. Others view it as a buying opportunity. This difference isn’t about financial literacy – it’s about risk tolerance, which is deeply tied to your:

• Time horizon (how long you plan to invest before needing the money)
• Financial goals (saving for retirement vs. a down payment on a house)
• Income stability
• Personality and emotional responses to uncertainty

Investing isn’t just a numbers game – it’s a mental and emotional one, too. When the VIX is high and headlines scream “crisis,” knowing your own volatility tolerance helps you stay grounded, focused, and less likely to make impulsive decisions that could hurt your long-term success.

How West Advisory Group Can Help You Navigate Market Volatility

Understanding your personal risk tolerance—especially in turbulent times—isn’t always easy. That’s where we come in.

At West Advisory Group, we’ve developed our signature PEAK FORMula to help clients confidently manage the transition from the accumulation phase of their working years into the distribution phase of retirement. We’ve seen just about everything the markets can throw at us—and while we can’t control it all, we’ve mastered the parts we can control through a process built to withstand the ebbs and flows of retirement life.

Our team of experts is perfectly matched to work with those who are five years or less from retirement. Using the PEAK FORMula, we help you:

• Clarify your short- and long-term retirement goals
  
• Assess both your emotional and financial ability to ride out market ups and downs
  
• Build a portfolio that aligns with your comfort zone
  
• Stay disciplined and focused when the headlines turn noisy
  

Markets will always be volatile—that’s a given. But what matters most is how well your plan accounts for that volatility and how confident you feel in sticking to it.

Know Yourself, Then Plan Around It

Sure, a spike in the VIX may signal growing uncertainty, but it doesn’t tell you whether to buy, sell, or hold. That decision should come from understanding yourself—your goals, your needs, and your unique risk profile.

At West Advisory Group, we build retirement plans tailored not to market headlines, but to the person sitting across the table. And we don’t just build the plan—we help you stay committed to it.

So if you’re within five years of retirement and wondering how to stay on track, let’s talk. The earlier you align your plan with your personal goals, the better prepared you’ll be—no matter what comes next.