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Volatility is Normal

DateFeb 03, 2016/Comments0/CategoryEquity

Volatility is very normal, Be comfortable.

Morgan Housel says, since 1900, U.S. S&P 500 index has provided an annualised return of 6.5%. During the same period, the average difference between any year’s highest close and lowest close is 23%.

We checked for last 10 years, the difference between highest close and lowest close for Sensex.

Year	High	Low	Difference
2006	14035	8799	37.30%
2007	20498	12316	39.91%
2008	21206	7697	63.70%
2009	17530	8047	54.09%
2010	21108	15651	25.85%
2011	20664	15135	26.75%
2012	19612	15358	21.69%
2013	21483	17448	18.78%
2014	28822	19963	30.73%
2015	30024	24833	17.28%

During last 10 years, Sensex has provided an annualised return of around 11%. During the same period, the average difference between any year’s highest close and lowest close is around 33%.

If this is how it is, year after year, decade after decade, century after century; why even listen to some explanation on why market went down or up. This is how it works. It’s as simple as this. Listening to media and analysts explaining volatility is sheer waste of time.

Volatility is very normal. If you can understand and get used to volatility, no one can stop you from creating wealth through equities. It’s volatility which scares most of the investors and they make crazy decisions due to the same.

The above pointers shows volatility is the way of the life in equity markets. It is normal to be volatile. It’s abnormal to be otherwise.

But for volatility, everyone would get rich from equity. Life cannot be that easy. Volatility ensures that only few who can be friendly with it, makes huge wealth from markets

If only we can get comfortable with volatility, equity investment is a cake walk.

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04 Dec 2024

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Volatility is Normal

Volatility is very normal, Be comfortable.

We checked for last 10 years, the difference between highest close and lowest close for Sensex.

Year	High	Low	Difference
2006	14035	8799	37.30%
2007	20498	12316	39.91%
2008	21206	7697	63.70%
2009	17530	8047	54.09%
2010	21108	15651	25.85%
2011	20664	15135	26.75%
2012	19612	15358	21.69%
2013	21483	17448	18.78%
2014	28822	19963	30.73%
2015	30024	24833	17.28%

During last 10 years, Sensex has provided an annualised return of around 11%. During the same period, the average difference between any year’s highest close and lowest close is around 33%.

The above pointers shows volatility is the way of the life in equity markets. It is normal to be volatile. It’s abnormal to be otherwise.

But for volatility, everyone would get rich from equity. Life cannot be that easy. Volatility ensures that only few who can be friendly with it, makes huge wealth from markets

If only we can get comfortable with volatility, equity investment is a cake walk.

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