I just returned home from the 20th Annual Global Indexing & ETFs Conference in Scottsdale, Arizona. Popular topics included moving beyond cap-weighted index funds, the growing search for yield and the increasing role of volatility in the management of risk.

The conference organizers had asked me to participate on the volatility panel and the moderator kicked off our panel's discussion by asking, “What do we really mean by volatility?” The easy answer might include addressing the craziness, or lack thereof, in fluctuating asset prices. A more sophisticated response might differentiate between historical price movement and the risk of loss. For example, if Exxon Mobil (XOM) drops from a $102 per share down to $74 per share because there are extreme price shifts in an underlying commodity in its business pipeline (i.e., oil), has the dividend aristocrat that pays 3% become more risky? Exxon Mobil's stock price, like oil itself, may become more volatile for a brief period, yet scooping up shares of XOM at $74 might actually be less of a risk than when it had traded north of a $100 per share.

Intrigue in oil price volatility notwithstanding, I felt the attendees would be better served to hear my perspective on what transpires in the real world; that is, Pacific Park Financial clients do not care to make the distinction between good volatility and bad volatility —  they just want me to respond to “black swans,” “left tails,” or stock market Armageddon in a way that preserves the bulk of their portfolio dollars. After all, for regular folks, volatility and risk are one in the same.

Should we blame them? In 2000 and again in 2007, scores of endlessly bullish gurus misled their followers by touting volatility as opportunity. Take author James Glassman who wrote the bestselling Dow 36,000 at the height of 2000 euphoria. Few books have ever been less prophetic and more harmful. The same Mr. Glassman boasted about American International Group (AIG) in June of 2008 because the stock was down 30% and had a P/E of 6. Had you bought AIG on his guidance, you would have lost all of your investment in the company. And these are the people who love to tell you about “good volatility.”