Volatility: A True Investor’s Dream

The true investor welcomes volatility … a wildly fluctuating market means that irrationally low prices will periodically be attached to solid businesses.

Warren Buffett

It’s easy to think of volatility as a bad thing. The first rule of investing is don’t lose money and often times volatility means losing money.

Why You Should Love Volatility

Volatility goes both ways. Crazy runs up and crazy runs down. These runs create opportunities. Down allows you to buy more. Up allows you to sell. It’s a lot harder than it sounds.

The problem is most people freeze up on the bottom and keep buying the top. Most people’s instincts tell you to do literally the opposite of what you should. The best stock pickers are built different, they thrive in times of volatility. You don’t need to nail the bottom, you don’t necessarily even need to come close. You just need to find the companies that can overcome the chaos.

Why You Don’t Have to Love Volatility

If handling this chaos sounds like too much, DCA is the way. Investing is inherently complicated, if trying to time the market on it is too much, just keep it simple and DCA.

I’m a big fan of DCA, but I’m an even bigger fan of buying the dip. Volatility gives us buying opportunities we never should’ve had. Take advantage of the irrationally low prices while they last.