Volatility? Long-Term Investors Do Not Panic!

Key Points

• Between the COVID-19 pandemic and the subsequent run of hot inflation and a Federal Reserve raising rates, the market was introduced to an old friend: Volatility. 
• Volatility- is the movement (up or down) of stock prices over different periods. The market could end the year up 1% but if it took a ton of routes to get there then there was high volatility.
• While volatility can be a measure of risk, we view it as an opportunity to invest in quality companies trading at a discount. 

Volatility is Normal but Some Years are Abnormal Exceptions

Starting in March of 2020 into 2022, the market has experienced high volatility which is nothing more than just violent swings up and down in the market due to various factors. These high levels have been the exception not the rule but volatility will certainly poke its head around at times.

It is important to remember that for a long-term investor, daily volatility isn’t of much importance. The importance lies in staying invested and not trying to outsmart the market by timing it. 

Had you come into the year in 2020 and experienced the 34% drop in shares that ended March 23rd, 2020 and sold at that time you would have missed out on a 68% gain through the end of the year. This is why it is important to Be Bold When Others are Fearful. 

Had you sold and waited to get back into the market until just June you would have locked in your loss. Historical data suggests that missing the best 10 days in the market in any given year will cut your gains by over 50%! More so even missing the best 5 days in the market will cut your gains by over 30%!

GenVest QuickTake

The moral of the story is to stay invested and ignore the short term noise. The stock market is a long game that has steadily risen throughout its history. The daily stress and checking the account every day not only hurts your mental health but can also hurt your wallet from trying to do too much. 

Volatility can provide moments where investors can look to purchase shares for companies trading at a current discount. 

Remember, the long-term Business Outlook and financial strength is what should matter most for investors so please do not sweat over volatility.