Freedom from Volatility: Why patience could be investors greatest edge
Therefore in the midst of turbulence, one timeless truth remains: staying patient and focused on the long term is one of the most powerful strategies for building wealth.
Embracing a long-term investment horizon allows investors to navigate the inherent volatility of markets
Volatility is part of the investment journey
Volatility is often viewed as a threat, but in reality, it’s a natural part of how markets function. Prices rise and fall in response to economic cycles, investor sentiment, news events like recent ‘tariffs war’, and geopolitical events. These swings can be sharp and emotional, but they are also temporary.The market has always recovered from downturns, even major ones like the 2008 financial crisis and the COVID-19 crash. Despite recessions, wars, pandemics, and inflation, long-term investors have been consistently rewarded for their patience.
History shows that markets tend to recover – and even thrive after periods of uncertainty. The average ‘Bull market’ period lasted 4.2 years in the US with an average cumulative return of 148.8% whilst the average ‘Bear market’ lasted 11.1 months with an average cumulative loss of -31.1%.
Therefore, despite short-term chaos, long-term growth has been remarkably resilient. By staying invested through both bull and bear markets, one can capitalise on any overall upward trajectory of market performance
Holding cash isn’t always wise:
Investors often think of cash as a safe haven in volatile times, or even as a source of income. In an era of low interest rates depresses the return available on cash to very low levels, leaving cash savings vulnerable to erosion by inflation over time. Investors should be sure an allocation to cash does not undermine their long-term investment objectives.
Start early and reinvest income:
Power of Compounding: Compounding is what happens when you earn returns not only on your initial investment, but also on any accumulated gains from prior years. Its power is so great that even missing out on a few years of saving and growth can make an enormous difference to your eventual returns.
-You can make even better use of the magic of compounding if you reinvest the income (which you do not need) from your investments to boost your portfolio value further. The difference between reinvesting – and not reinvesting is significant.
Higher the Risk in an asset class gives a higher return
The strongest-performing assets have also been the assets whose prices have been most volatile. If you want to target a higher level of return, you have to be willing, and able, to tolerate larger swings in asset prices along the way. The opposite is also true.
Selling after the market has experienced a large fall is normally the wrong strategy. However, resisting the urge to panic following a market decline can be difficult. People tend to sell after equities have already fallen.
Market timing can be challenging: Holding cash after economic or geopolitical disruptions may appear attractive, though historical data indicates it is not often the most effective strategy. For example, the Nifty index generated a return of 70.87% from March 31, 2020 to March 31, 2021, for investors who invested during that period.
Diversification:
The past 5 years have been a volatile and tumultuous ride for investors, with natural disasters, geopolitical conflicts and a global pandemic. A well-diversified portfolio of quality investments, spreads risk across sectors and asset classes, helping cushion downturns.
Studies have shown that a well-diversified portfolio can reduce volatility by as much as 30% compared to a portfolio concentrated in a single asset class.
ETMarkets.com
Systematic Investment Plan (SIP):
Investing systematically in equities helps in rupee-cost averaging and hence lessens the results of short-term market fluctuation on your investments. In a falling market, SIP will help in acquiring more units for the investor. Therefore SIP eliminates market timing which is difficult to predict.
Longer the investment horizon—lower the chances of making negative returns in equities
Warren Buffet said—“The stock market is a device for transferring money from the impatient to the patient”. Therefore, by investing for the short term, the investor can experience intermittent market volatility/losses.
However, the long term (patient) investor is rewarded. In the last 5 years, the Nifty has given a return of 16.18% (XIRR)( July 2020 to July 2025) while the 1 year return on NIFTY is -0.73% (July 24 to July 25)
Stay invested & keep perspective— market downturns are normal and short-lived
Markets downturns are normal and cyclical in nature. The NIFTY has seen has risen several fold over the years—thereby indicating that it has created tremendous wealth for investors. However, at the same time there have been intermittent corrections /volatility from time to time.
Maximum drawdown means the maximum loss (in % terms) from the top of the index to bottom of the index (where the market recovery starts). The Nifty saw a negative return during the global financial crisis of 2008-09 of 50%. At the same time, it can be observed that these market downturns do not last for too long, and are generally short lived. The circles in red are the periods of downturn.
ETMarkets.comFocus on Quality Investments
This involves selecting companies with strong fundamentals, such as a competitive advantage, solid management, and a sustainable business model. Companies that consistently generate positive cash flows, maintain healthy balance sheets, and possess a competitive edge are more likely to deliver superior long-term returns.
Data from Morgan Stanley suggests that companies in the top quartile of return on equity (ROE) tend to outperform the market by 3-4% per annum over long periods.
The Power of Patience:
When markets are volatile, fear often drives investors to sell, shift, or sit out. These emotional decisions often lead to missed opportunities. Long-term investing turns down the volume on the daily noise and keeps you focused on what really matters—your future. Patience isn’t just about holding on—it’s about staying focused on the bigger picture.
Benefits of staying patient and invested are as follows:
Avoiding emotional mistakes – Reacting to short-term noise can cause you to sell low and miss the rebound that often follows.
Compounding returns over time – The longer your money stays invested, the more it can grow. Compounding needs time – and uninterrupted progress.
Capturing the market’s best days – Historically, the best market days often come within weeks of the worst. Staying invested ensures you don’t miss them.
Time, not timing, builds wealth: Even professionals rarely get that timing right. Time in the market is usually more successful than trying to time the market. If you missed just the 10 best days in the market over the past 20 years, your returns could be cut almost in half.
Reduced Transaction Costs: Frequent trading incurs costs such as commissions, bid-ask spreads, and taxes and reduced returns.
Volatility is short-term noise. Your goals like retirement, education, generational wealth are long-term stories. True investing success isn’t about reacting quickly, it’s about being consistent, patient, and purposeful.
Volatility will come and go, but your long-term goals remain. By keeping your eyes on the horizon and staying committed to your investment strategy, you give yourself the best chance of long-term success.
Happy investing with patience for a beautiful journey to growing a sizeable corpus!!
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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