I've been through the dot-com crash, the 2008 financial crisis, COVID, and more market scares than I can count. Each time, the noise was deafening. Each time, the financial media found reasons why this time was different, why the rules had changed, why investors should be worried. And each time, the clients who stayed calm and stayed invested came out ahead of those who didn't.
That's not to say volatility doesn't matter. It does — particularly if you're approaching the point where you need to draw from your portfolio, or if your investments are poorly constructed for the risks you're actually taking. But for long-term investors with well-built portfolios, volatility is mostly noise. The challenge is treating it that way when it doesn't feel like noise.
Why volatility feels worse than it is
There's a well-documented psychological phenomenon called loss aversion — the pain of losing money feels roughly twice as intense as the pleasure of gaining the same amount. This is why a 10% market drop feels catastrophic even when your portfolio has grown 40% over the previous three years. Your brain is wired to respond to the loss more powerfully than it responds to the gain.
Understanding this doesn't make you immune to it. But it does help you recognise when your emotional response to a market move is disproportionate to its actual significance. The question to ask yourself in a downturn is not "how much have I lost?" but "has anything fundamental changed about my long-term plan?"
"I've never met a client who regretted staying invested through a downturn. I've met many who regretted selling."
The framework I use with clients
When markets get rocky, I ask clients three questions. First: has your investment horizon changed? If you were planning to keep this money invested for ten years and the market drops 15%, you still have ten years. The drop is real, but it's a paper loss within a long time frame. Second: has the underlying quality of your investments changed? A good company doesn't become a bad company because its share price falls. Third: are you invested in line with your actual risk tolerance, or have you been taking more risk than you realised?
If the answer to all three is no, no, and yes respectively — then the right response is almost always to do nothing. Or, if you have cash available and the conviction to act on it, to consider whether a market downturn represents a buying opportunity rather than a reason to sell.
When volatility is a genuine problem
There are situations where volatility is a real risk rather than just an emotional one. If you're close to retirement and a significant market drop forces you to sell assets at depressed prices to fund your income, that's a genuine problem — not just a paper loss. This is why portfolio construction matters so much, and why the transition from growth to income-focused investing is so important to get right.
A well-constructed portfolio for someone approaching retirement should have enough in stable, income-generating assets that a market downturn doesn't force liquidation of equity positions at the wrong time. This isn't about avoiding risk — it's about sequencing it correctly.
The practical takeaway
If you find yourself anxious every time markets move, it's worth asking whether that anxiety is telling you something useful. Sometimes it is — it might mean your portfolio is more aggressive than you're actually comfortable with, and that's worth addressing. But often it's just the noise of short-term market movements conflicting with a long-term plan that remains sound.
The clients I've worked with who've built real wealth over time share one characteristic above all others: they made their investment decisions based on their long-term goals, not on how markets were behaving in any given week or month. That discipline — staying focused on where you're going rather than reacting to every bump in the road — is worth more than any individual investment decision.
Graham Noble is the founder of Vitpi, a boutique wealth management firm based in Dubai.
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