Markets Always Rise – But Never in a Straight Line

Why Volatility Will Help You ….

For patient set-and-forget investors, the recent tariff-driven volatility was overdue and welcome.

Pullbacks enable long-term investors, like myself, to accumulate quality assets at better prices.  As Warren Buffett says:

“The Stockmarket is a device for transferring money from the impatient to the patient” 

We do this by pound-cost-averaging.  This has always worked and helps our portfolio compound and grow.

Complacency …

Before the recent wobble, stocks had seen 2 years of relative calm that provided 40%+ growth.

Although nobody complains about strong markets (unless they have little in stocks), that can lead to complacency.

People had started believing markets always rise in a straight line (of course they don’t).  And then, the Buy-the-S&P500 brigade grew convinced diversification didn’t matter.  It always matters.

Markets don’t rise in a straight line:  Pull-backs are healthy ..

.. and normal.  In fact, that’s exactly why markets have returned 8-10% pa, on average, since day-dot.  The chart below shows how stocks have grown over the last 50+ years but certainly not in a straight line …

(using US stocks as they have longer data available)

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WHY Volatility helps us …

Think about it: if stocks had zero volatility and grew in a straight line, the whole world and their dog would be fully invested in stocks.

If everyone was fully invested, there would be no risk premium and no new money entering the market. Stock returns would then be risk-free and equal to cash savings rates.

It’s a shame that market fluctuations and perceptions discourage the majority of people from investing.  In the UK only 23% of people actively invest in stocks, according to Hargreaves Lansdowne.  In the US that’s a lot higher.

And because the majority of people stay on the sidelines, earning cash returns that are lower than the real inflation rate, that then creates the risk-premium which enables those higher stock returns.

What this means for you …

Stocks always fluctuate. That’s why they make great long-term returns.  Pull-backs are always a fantastic opportunity to pound-cost-average in.

Stocks remain the best long-term wealth creation tool that exists.  Just ignore the noise and remember to be diversified, passive and mindful of fees.

Always Remember:

• Time in the Markets always beats timing the markets
• Stay Diversified 
• Minimise those leakages:  Fees, Inflation, and Taxes
• Financial Markets are a great source of recurring income  
• ETFs, Balanced Funds and Options achieve all the above
• Being educated helps you outperform 99% of the population

… to ensure your investments work for YOUR financial freedom (not someone else’s)     

And … 

For more guidance, our Investment Academy will help you implement all of this in a step-by-step way.   

Thousands of people have learnt how to diversify and pound-cost-average into low-cost, set-and-forget ETFs & Funds for inflation-beating growth.  And Options to create recurring income.

Click here to learn about our Investment Academy

Finally …

– Don’t take the above as advice as it may not apply to you personally

– Your Capital is at Risk

– You may not be covered by the FSCS

– Anything mentioned in a podcast or in a previous article was valid at that time and may not continue to be now