Still, it may be useful for investors to follow the movements in the VIX because they can be a contrarian indicator. Magoon says investors should use the VIX like meteorologists use a barometer for predicting the weather. "It's one of the vital signs of the market that gives you a look into the psychology of the market," he says.
Investors can follow the VIX just like they can follow investor sentiment surveys, like the one that American Association of Individual Investors releases each week. When the VIX is low relative to historical standards, it may be a warning sign that a sell-off is near, but most experts say it's probably not in your best interests to try to time those spikes.
Twitter: @benbaden
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