Volatility, actually, is always expected | Merchant West

Articles | Volatility, actually, is always expected

When people act like the financial world is falling apart, it’s helpful to remember that volatility is normal, and there are simple things you can do to pursue a better investment experience.

Recently, the market has shown a lot of volatility (mostly downside volatility). This is often very unnerving and distressing, even when you have a solid plan backed up by an investment philosophy you believe in. For much of the time, it feels good to know that if you are a long-term investor, you can go about your life with the confidence true conviction brings. But of course, when everyone else is acting like the world is collapsing, it can be very helpful and soothing to remember a few things.

First, volatility is a normal part of investing. We all know that markets go up and down—so we can be temporarily disappointed by downturns, but we shouldn’t be surprised by them. Most importantly, for long-term investors, reacting emotionally to any volatility or draw-downs may be more detrimental to portfolio performance than the drawdown itself.

So, how do you ignore or filter the noise and financial press in general? Working with a good financial advisor can help you see past the headlines and cultivate discipline and a sense of security, knowing you have a well-thought-out plan in place that is working toward your goals. This is the pure power of a strong and trusting relationship with a professional advisor.

We have a few clients who have changed their life in a profound way by changing his attitude about markets. They call themselves “Transformed Investors”, because while they once felt like they were being held hostage to the whims of markets, they have now settled into a healthy, less emotional relationship with investing, anchored by this belief in the way markets work.

We understand that times like this can be difficult, especially since we don’t know how long they will last. But try not to lose sight of your long-term goals and remember that uncertainty is truly part of what creates opportunity. Equities have higher expected returns than other investments because they require investors to bear additional risk. Without uncertainty, investors wouldn’t get paid for taking on this risk.

As we’ve said many times, much of the financial services industry is geared toward making people think they can avoid uncertainty. But the future is unknowable. We believe the best approach is to make informed choices, adjust as your needs and objectives change, and be okay with a range of possible outcomes. And remember: You’re not in this alone. Your financial advisor should be there to help remind you that a properly built plan considers the ups and downs of the market.


​By Graydon Morris

Managing Director

Sterling Private Wealth


For more information on how our wealth advisors can assist you, contact us directly at info@merchantwest.co.za