Volatility can be measured and charted and we can even “invest” in it, but do you know what volatility is and what it looks like? In some ways recognizing volatility is like that old definition of pornography, “You’ll know it when you see it.” It’s in your face due to the media talking heads who hype it breathlessly on a daily basis and you see it when you check your account balances. Read Your One-Minute Guide to Stock Volatility offered by FINRA to quickly learn about what volatility is.
An interesting observation for us as advisors over the last month as volatility returned is that many clients have said to us, “Your phone must be ringing off the hook with worried investors.” Actually – it has not been ringing at all. I’m not sure if it’s because we’re all been preconditioned to expect volatility and market corrections or because we’re doing a great job as advisors teaching our clients to “hold the course.” I’m hoping that it’s the latter.
Did you know that even when there are volatility moves of +/- 2% in a day that historically it has led to higher returns? See this very interesting short paper by SEI, Volatility and the Two Percent Day. It does say to stay the course and offers some pretty convincing math as to why.
If you or anyone you know needs help with understanding volatility or dealing with it in your portfolio–we do that! Give any one of us a call.