Happy 2019! This year should be interesting to say the very least. It appears the bears are moving in. One word we’ll be hearing alot is volatility. However, what does volatility really means?

What does volatility really mean to you

In essence, market volatility is the price range in which a stock or a market rises or falls in a day or week. Let’s use an example. If the Dow Jones went up or down 500 pts within the day, you could say the market was volatile. If the range was 50 to 75, it was rather an eventful day.

For example, let’s use our analogy of the bull and the bear. Imagine they’re having a boxing match. It’s a slugfest. Every round is either going to the bear or the bull decisively. The fans of the both players are sure that their player is going to win. The emotions are high and everyone is looking for that knockout punch. Now, compare this to a fight where it’s much more even. People are on the edge of their seats but the win will probably be decided by the judges.

Here’s the point. All it does is make it exciting. That’s all. It probably won’t affect the outcome. I repeat, all it does is make it exciting. Let’s say you’re a gambling person. In the first scenario, you’ve betted on one of the players. Would you consider changing your bet after every round? Of course not! You would’ve done your homework and put your money on your preferred player (the bull!). Why? Because you have a long term vision, the fight is 13 rounds and you know that the bull will eventually come back on top.

What really happens

Most investors change their bets at the end of every round. The bull won the first round. So investors bet on the bull. Second round, the bear won so they change their bet to the bear. This vicious cycle goes on and on. In the end, they don’t make any money because they’re were changing their plan on every whim. You see, their emotions get the better of them. The market is no place for emotions.

What to do

The first thing to understand that price volatility is simply an evaluation in a very short time frame. If you have a plan, a time frame (10 to 35 years) and keep your emotions in check, it’s just a correction for the long term. For example, let’s say you owned a house and this house is worth $400 000. Some months, you could sell it for $410 000 and some months you could probably get only $380 000. Would you say that the months you can get $380 000, you’ve lost $20 000? The answer is no. You’ve haven’t lost because you haven’t sold. This is what price volatility is all about. It’s an evaluation!

This is the hard part.

1. Think long term. Where will the market be in 10 years.https://gettingrichsimply.com/wp-admin/post.php?post=42&action=edit
2. Eliminate the noise. Every news outlet will be predicting doomsday and that this is the next Depression.
3. Look to the past to see the future. Volatility and bear markets have been around since the bulls. Pick any date and see what happened. Remember, markets flow in cycles.
4. Read about what the pros do.https://www.principal.com/volatility-3-ways-stay-calm-when-market-not