Volatility Equals Returns
You can’t separate market returns from market swings.
What This Means
One of the biggest mindset shifts investors can make is understanding that volatility is normal.
Most people want the long-term returns the market has historically provided — but they don’t want the temporary swings that come along with it.
Unfortunately, the two come together.
Higher-returning investments usually experience bigger short-term moves along the way. That’s simply how markets work.
Volatility is not a flaw in the system.
It’s the price investors pay for long-term growth.
This becomes easier to understand when you think about it in real life. Business owners experience volatility too — revenue fluctuates, economies slow down, industries change, and uncertainty is constant. But over long periods of time, strong businesses can still continue growing.
Markets work similarly.
The mistake investors make is assuming volatility means something is “wrong.” In reality, short-term swings are often just normal market behavior.
The key is understanding what you own and emotionally preparing yourself for the kind of movement that comes with it.
Because when volatility arrives — and it always does eventually — investors who panic often interrupt the long-term compounding they were trying to achieve in the first place.
The best antidote to volatility is usually time.
Common Questions
How much volatility should I expect as an investor?
It depends on what you own. Every investment has its own expected daily, weekly, monthly, and yearly range of movement. Some investments naturally move much more than others.
The important thing is understanding the type of volatility that comes with the investments you own
What can I use to learn an investment’s volatility?
We use an indicator called ATR — Average True Range. ATR measures the average amount an investment has historically moved over a certain period of time.
It helps give investors a better understanding of the type of daily or weekly movement that may be considered “normal” for a specific investment before emotions take over during volatility.
Why do higher-return investments move more?
Higher-return investments usually move more because markets constantly reprice growth expectations, earnings, risk, and future potential.
The bigger the upside opportunity, the bigger the swings investors usually have to emotionally handle along the way.
Remember This:
Volatility is the price investors pay for long-term returns.