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Market volatility wreaks havoc with our mindset on a daily basis – but the markets are always volatile. The degree of volatility is dynamic, and both low and high levels lead us to make bad trading decisions. I’m here to tell you not to fear market volatility. Now is the time to accept it and look for opportunities to gain from it.
Keep a long-term mindset
Look at the most successful investors of the past several decades. How did they build their wealth? A long timeline is one reason. Just ask legendary investor Warren Buffett, who buys companies he intends to hold forever. He likes to buy stocks that are cheap, but he will also get on the “train” when a stock is doing well. He bought Apple a few years back when it was still rolling.
Buy on dips
Other investors use different winning strategies, like buying on dips and sharp pullbacks. These dips are created out of investor fear, mostly of the unknown. And that is precisely where volatility fits right in.
Market volatility rises in the face of uncertainty. Whether it is waiting on earnings reports, a decision by the FDA on a medication, election results, or geopolitical situation to resolve, investors and traders worry about the outcome. There is never a time to relax So, when investors see higher volatility due to uncertainty, the usual response is to hit the sell button. As everyone sells, stock prices fall sharply in kind.
Be patient while others fear market volatility
Selling without understanding the rationale for it (shoot first, ask questions later) presents enormous opportunity for the patient investor. Wealth is built by those who stick their necks out, understand that long term investing is the way to go, and buy stocks when others are throwing them away. Being patient can lead to outsized returns.
So next time you see the markets swoon because of an overbought condition or breaking news, take a look at what is being tossed. Is it one of the names you have coveted? These opportunities happen frequently, but if you’re not watching and ready, you’ll just miss out.
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