Volatility is a Monster who Goes Around Scaring Investors


02 Nov Volatility is a Monster who Goes Around Scaring Investors

There are many ways to drive from Bedok to Changi Airport.

You searched Google Map which suggested two routes to you. What made you decide one route over the other?

Journey and Process

Maybe you have chosen the expressway because there would be less traffic lights and the journey will be smoother, despite a slightly longer distance.

We know that trying to pick stocks can be very frustrating. Skip that frustration, get 21 ideas to finding profitable stocks in an instant. 

Some may consider the other route because he or she is more familiar with it, and moreover the distance is shorter.

Visualizing how the journey would pan out (potential traffic jam, frequency of traffic lights, etc) is second nature to drivers. However, we fail to apply this thinking to investing. Investors often emphasize on potential returns (destination) and overlook the volatility (journey).

Look at the chart below. Both strategy A and B give you the same returns. But the process of getting there is different. Strategy A has a lot more ‘twists and turns’, or academics call it volatility, while Strategy B achieves similar returns with less adventure.


The danger of not considering the volatility in a strategy is that the investor may give up before reaching the destination. And sadly to say, most investors give up investing when the price has came down markedly. To put it crudely, volatility will scare the shit out of you. It is hence important to understand the potential volatility of any strategy and at least be mentality prepared for it.

Jon and I wrote about volatility here and here. You should spend some time to understand volatility and what it can do to you and your purse. There is a reason why we keep harping on it.

Permanent Portfolio is one of the best strategies to minimize volatility while not giving up too much returns. Read more about it here.

Always think about the journey before you invest. Can you continue the ride when times are bad?


Grant Yourself The Ability To Make 10 - 15 % Returns Annually. Lifetime Access. Learn at your convenience. Bag stock market profits with ease: Access Now!

New to investing and could use some free and useful guides? Check out: "How to start investing in Singapore"

  • Are you prepared for War?
    Posted at 10:57h, 05 March Reply

    […] have a pure portfolio of stocks, are you prepared to stomach the increased volatility and have your portfolio value fluctuate more on a daily […]

Post A Comment

Another popup!? 

We Are Sorry! But WAIT...

Since you are already reading, why not read on? You are probably reading an article on this site because you are interested in investing and personal finance.


If that's true, this value packed ebook, "Investing Your First $20,000" would definitely help you.


Simply enter your email below and we will send you the ebook plus insightful finance articles just like the one you were reading before this popup - right to your inbox. No more popups!


Try it. You can unsubscribe any time.

Good Job!

Thank You For Your Time

Do check your email for the ebook!