When markets get choppy, it’s natural to feel nervous. Everyone with a heart (and subsequent blood pressure…) will have a tinge of fear when volatility hits. You might see headlines shouting about “billions wiped off the market” or watch your portfolio dip and wonder if you should pull back until things settle.
Again, you’re not alone. Most investors feel uneasy when the value of their investments swings — sometimes sharply — in a short time. But here’s the truth: volatility isn’t a flaw in the system. It’s a feature. And more than that, it’s the price of admission to the long-term growth you’re aiming for.
In simple terms, volatility is just a measure of how much investment prices move over a given period of time. The more prices move up and down, the more volatile an investment is said to be. Shares in a company, for example, can rise or fall dramatically in a single day based on news, earnings reports, or market sentiment.
Bonds, on the other hand, usually move more slowly and predictably, but they also tend to deliver lower returns over time. The reason is simple: the greater the potential reward, the more uncertainty (and therefore volatility) you have to accept along the way.
It’s tempting to wait for things to calm down before you invest, or move everything into cash until the dust settles.
But the problem with that approach is that markets don’t send an invitation when it’s time to get back in.
Some of the best days in the market often come immediately after some of the worst. If you’re sitting on the sidelines when that rebound happens, you miss it; and missing even a few of those strong days can significantly weaken your long-term returns. Avoiding volatility entirely typically means sticking with low-risk, low-return options, such as cash or fixed deposits. Those have their place, especially for short-term needs, but over the long haul, they often fail to keep up with inflation and leave you with less purchasing power.
One way to think about volatility is like turbulence on a flight. You don’t love it, but it’s part of the experience of getting where you want to go. The key is to simply fasten your seatbelt, trust the plan, and remember that you’re moving toward your destination. Your portfolio is designed with your goals and risk tolerance in mind, balancing growth potential with your comfort level. Volatility doesn’t mean the plan is broken; it means the market is doing what it has always done.
If you’re finding the current ride uncomfortable or have questions about how much risk is right for you, let’s talk. Together, we can make sure your plan still suits your goals, and help you stay the course through the ups and downs.