Opportunity in Volatile Markets

Matthew Gray |

Growing up in a house with my mom and three sisters, I quickly learned the importance of buying on sale. 

It’s a great feeling to find that nice jacket or the springform pan you’ve been eyeing for 50% off! 

My wife has continued to teach me this lesson. Rarely a month goes by when she doesn’t uncover some absurd deal where we pick up something valuable for pennies on the dollar. 

I don’t believe we are alone when it comes to being excited about buying things at reduced prices. 

While I haven’t completed any extensive studies, all I have to see is the crowds of people getting up at unearthly hours on Black Friday to confirm my suspicions. 

If people feel this way about most products and services, why do most people get nervous when the stock market takes a tumble? 

I understand that for folks who already have substantial amounts invested in the market, watching the S&P 500 tick down can be alarming. And it is true that if you are in retirement, living off of your investment withdrawals, a down market can be a very bad occurrence. 

However, the majority of investors are still saving money to add to their investment accounts. In this case, volatility is actually your friend. 

When you put money into stocks and mutual funds when their price is falling, you are buying on sale! As long as you believe the market will go up in the long term (5-10+ years), this is really the best-case scenario. 

Despite this reality, many investors do precisely the opposite. It is common to see folks sell out of stocks when the market tumbles due to fear. 

This is akin to selling your new car immediately after driving it off the dealer’s lot. 

Although most of us would be more comfortable if the market just steadily increased all the time, it would essentially be like always shopping at Kohl’s but they never reduce their prices. Or you could compare it to a world without Cyber Monday. 

Not only is this true and can help you make better investment decisions, but it also can reduce your stress if you view market movements this way. 

Imagine a world where people didn’t panic when the Dow dropped 3,000 points. Instead of wringing their hands in despair, people would line up to invest like it was Black Friday! 

Is that too much to hope for? Probably so. 

However, I do hope this gives you a different perspective on stock market volatility so you can make better decisions and sleep a bit easier at night. 

Take it from my wife, mom, and sisters. Buying on sale is always better than paying full price!

If your investment strategy is an area you would like to discuss, I’d be honored to have a conversation with you. You can schedule a time to talk with me by clicking here.