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Volatility Is The Price Of Admission

If you’ve seen the news lately, you’ve probably seen
some of the following headlines:

“Market Plunges”

“When Will the Bleeding Stop?”

“Market Slides”

"Worst Day Since Brexit"

“Worst Day/Week/Month Since (insert arbitrary date)”                     

"Worst Point Decline in History"

While these headlines are certainly true, they are far from the whole story. The whole story isn’t all that newsworthy, but perhaps it is blog-worthy and you’ll keep reading.

The Whole Story

  1. Volatility is the price of admission to the stock market. That is a good thing. We wouldn’t have stock market returns without the volatility.  
  2. Corrections are necessary. Over the past two years, we hadn’t had a single 5% decline in the S&P 500. That is not sustainable and while this correction doesn’t feel good, it certainly is a sign of a functioning stock market.
  3. The stock market is extremely complex. There is almost never a singular reason for a market sell-off, though many will try to explain exactly why it is happening. This is tempting, as it allows us to feel in control, but we must remember that the stock market is not only volatile, but in the short-term day-to-day, it is unpredictable.

What Can Investors Do?

One of our principles of investment management is to manage emotions. We must remember that making frequent changes to portfolios, especially based on what we’ve heard in the news, may not improve your returns.

Staying disciplined to the investment strategy chosen, which is suited specifically to your goals, is something within your control and should be your focus. Remember, it is changes to your life that should dictate changes to your investment portfolio.

Further Reading:

Key Questions For The Long-Term Investor highlights the importance of focusing on what you can control.

“What’s Next?” was a blog post from May 2017 when the Dow crossed 21,000 for the first time and we discussed an upcoming correction and the emotions around market highs and corrections.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Investing involves risk including loss of principal. No strategy can assure success or protect against loss.