We have lived in an era of unprecedented volatility, and there really is no telling if this volatility will continue, lessen, or, dare I say, increase. Looking backwards, what I can say (or confess) is that I was not as prepared mentally for the volatility that transpired starting in the latter half of 2008 as I should have been. The rest of this piece details the basic lesson, as revealed in the title, that I have taken from this era.
Traders love volatility, as it increases the margins of their game (assuming they are right more often than they are wrong, in weighted magnitude terms). I personally think that volatility spooks a great many buy-and-holders into making poor decisions (i.e. selling low), for it painfully disrupts their major aim of slow and steady progress. Institutionals just cannot handle losing, and, if the volatility comes in a bear market (i.e. is downwardly biased), they will seek refuges of safety. But what about we fundamental investors? What should our attitude towards volatility be?
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