Market volatility and why it matters less than people think
21st November 2025
The last week has been a stark reminder that markets rarely move in straight lines. At the time of writing, the S&P 500 is 5.5 percent below its all-time high. The Nasdaq is down 8.3 percent, the FTSE 100 is down 4.8 percent, the Euro Stoxx 50 is down 5.5 percent, and the MSCI All-World index is down 5.0 percent. Most of these declines have taken place within a matter of days.
At the individual company level the picture looks even more dramatic. Nvidia is down 14.9 percent despite a brief jump after its recent earnings call. Apple has fallen 4.0 percent, Microsoft 13.9 percent, Alphabet 5.5 percent, Amazon 16.0 percent, and Tesla is almost 20 percent off its high.
At the individual company level the picture looks even more dramatic. Nvidia is down 14.9 percent despite a brief jump after its recent earnings call. Apple has fallen 4.0 percent, Microsoft 13.9 percent, Alphabet 5.5 percent, Amazon 16.0 percent, and Tesla is almost 20 percent off its high.
On the surface this feels uncomfortable, but the drops do not tell the whole story. When markets rise with very little interruption, it creates an illusion of stability. Confidence grows, leverage quietly builds up in the background, and a pullback becomes almost inevitable. In many cases a spell of volatility acts as a necessary release valve rather than a sign of structural weakness.
This is a point that tends to get lost in the noise of financial media which, like all media, is incentivised to focus on sharp movements and dramatic language. The long-term investor gains very little from paying attention to that noise. A quick look at financial history teaches you far more. Volatility is, and always has been, a feature of equity markets. It is the flip side of long-term growth. Without it, returns simply would not exist. If you want the gains, you must be prepared to live with the fluctuations that come with them.
This is a point that tends to get lost in the noise of financial media which, like all media, is incentivised to focus on sharp movements and dramatic language. The long-term investor gains very little from paying attention to that noise. A quick look at financial history teaches you far more. Volatility is, and always has been, a feature of equity markets. It is the flip side of long-term growth. Without it, returns simply would not exist. If you want the gains, you must be prepared to live with the fluctuations that come with them.
This is also why diversification matters. Investors who sit 100 percent in equities feel the full force of every movement, and this is far more common than people realise. Many self-managed portfolios end up fully equity-exposed regardless of the investor's actual appetite for risk. Positioning yourself correctly from the outset, ideally with professional guidance, helps ensure that the equity component does what it is supposed to do while the other parts of the portfolio offer stability. When the structure is correct, periods like this do not signal that something is broken. They simply reflect a normal part of market behaviour. The world is not ending. Long-term plans remain intact.
Volatility also plays a very different role for those contributing regularly. Pound-cost averaging works best when markets are fluctuating, as falling prices allow each contribution to purchase more units. Combined with compounding, this is one of the quiet forces that drives long-term wealth creation. Neither concept is intuitive because the human brain is not wired to think in exponential terms, but the results over time are undeniable.
With a well-designed plan, volatility stops being a source of anxiety and starts becoming something you can take in your stride. Confidence in the planning process is what allows investors to stay disciplined when markets move sharply, and it is this discipline that ultimately makes the biggest difference to long-term outcomes.
Volatility also plays a very different role for those contributing regularly. Pound-cost averaging works best when markets are fluctuating, as falling prices allow each contribution to purchase more units. Combined with compounding, this is one of the quiet forces that drives long-term wealth creation. Neither concept is intuitive because the human brain is not wired to think in exponential terms, but the results over time are undeniable.
With a well-designed plan, volatility stops being a source of anxiety and starts becoming something you can take in your stride. Confidence in the planning process is what allows investors to stay disciplined when markets move sharply, and it is this discipline that ultimately makes the biggest difference to long-term outcomes.
