Family Wealth blog

Is the Volatility Monster Real?

A cartoon monster sticks its head up over a scary stock market trendline. The title reads Is the Volatility Monster Real?

As scary as it sounds, the Volatility Monster is real. Yes, it’s really only a metaphorical creature symbolizing the unpredictable fluctuations in the stock market. But it can spring up unexpectedly, inciting panic and fear among investors—especially those with a short-term approach to investing.

However, like any monster, the Volatility Monster can be tamed and, for the most part, ignored. Here are a few things to think about to avoid any unnecessary nightmares.

The Nature of the Beast

The main thing to keep telling yourself is this: the Volatility Monster thrives on uncertainty and fear. When it comes to investing, this beast knows that the low-hanging fruit is found in the panic that ensues when the market takes a sudden dip. This is what causes many investors to make impulsive decisions that can lead to significant losses. However, it’s important to remember that volatility is a natural part of the market cycle. Markets rise and fall, and periods of volatility are often followed by periods of growth—even if they don’t follow as soon as we would like.

Taming the Monster

What’s the most effective weapon against the Volatility Monster: long-term investing. By focusing on long-term trends and avoiding impulsive decisions, you can navigate market volatility and focus on building generational wealth. A long-term investment strategy allows investors to ride out short-term market fluctuations without succumbing to fear and panic.

Heroes always defeat their arch enemies by identifying their greatest weakness. It’s easy to identify this Achilles heal in the Volatility Monster, because it has a relatively short lifespan. Economist John Maynard Keyes said, “In the long run, we are all dead.” 1 What he meant was that markets and economies have very long lifespans, so over time, nothing seems as world-changing as in the present. In other words, maybe the best way to not fear the Volatility Monster is to essentially ignore it until it goes away.

Now, does this mean that money managers should hold their positions no matter what happens? Of course not. They’re paid to study markets and companies and stock prices constantly. What they will do is act based on data and information instead of reacting out of fear and uncertainty.

The Power of Patience and Discipline

The dynamic duo of patience and discipline are crucial when taming the Volatility Monster. During periods of high volatility, it may be tempting to make impulsive decisions that seem to be safe moves at the time. More often than not, though, if patience prevails, the markets will return to “normal” and, along with it, your portfolio won’t be as scary as before. This is where long-term investors call on their superpower of discipline to avoid letting irrational fears and flagging confidence cause them to flee otherwise valuable stock positions.

Also, especially when heading toward retirement, having cash available is a reasonable way to make one’s discipline powerful enough to stand up to the Volatility Monster.

The Takeaway

Before turning out the lights tonight, we should say that the Volatility Monster isn’t actually real, at least not for grown up long-term investors. And even if it were real, it’s crucial to remember that these visitations by the Volatility Monster would only be temporary. Of course, to those with little patience and equally little confidence in the management of the companies they invest in, yes, the Volatility Monster must seem very real indeed. But they don’t have what we have: a solid understanding of the behavior of markets over longer periods of time, and the superpowers of patience and discipline.

So, with a long-term investment strategy, you can tame even the most frightening Volatility Monster and sleep soundly, even during major market corrections. And if you’re still not convinced that this Volatility Monster is just a myth, maybe it’s time to call someone for help. No, not the Ghostbusters, your financial advisor!



Disclosure: This information is for educational and informative purposes and shall not be considered a specific recommendation. Readers are advised to speak with their advisor at JL Bainbridge to determine their specific recommendations that meet their investment objectives and to review their portfolios. The material being provided is thought to be accurate. However, the information is compiled from multiple resources and may become outdated or otherwise rendered incorrect by new research or corrections without notice. J.L. Bainbridge & Co., Inc., is not a broker dealer and does not offer tax or legal advice. Please consult your tax or legal advisor for assistance regarding your individual situation. It should neither be assumed that future results will be as profitable or that a loss could not be incurred. For more information related to our firm, please see our disclosure brochures at and

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