Volatility is not the enemy of growth
6th February 2026
Volatility is often spoken about as something to be avoided, managed away, or feared. In reality, it is one of the essential ingredients of long-term growth. Without volatility, markets would be static. Prices would not adjust, capital would not be reallocated, and opportunities would not exist. Every meaningful period of wealth creation has been built on the back of short-term uncertainty.
When markets move sharply, particularly to the downside, it can feel uncomfortable. Headlines amplify fear, narratives form quickly, and investors are encouraged, directly or indirectly, to take action. Yet volatility itself is not a signal that something is broken. More often, it is simply the market doing what it has always done. Digesting information, repricing risk, and moving capital between regions, sectors, and asset classes.
The key is understanding that volatility is not separate from growth. It is the mechanism through which growth occurs.
When markets move sharply, particularly to the downside, it can feel uncomfortable. Headlines amplify fear, narratives form quickly, and investors are encouraged, directly or indirectly, to take action. Yet volatility itself is not a signal that something is broken. More often, it is simply the market doing what it has always done. Digesting information, repricing risk, and moving capital between regions, sectors, and asset classes.
The key is understanding that volatility is not separate from growth. It is the mechanism through which growth occurs.
A consistent pattern across market history
If we look back across financial market history, the pattern is remarkably consistent. Sharp drawdowns are followed by recoveries, and those recoveries go on to form part of the long-term upward trend. The events change, but the behaviour does not.
The oil crisis of the 1970s, Black Monday in 1987, the dot-com crash, the global financial crisis, the eurozone debt scare, the COVID sell-off, and the inflation and rate shock of 2022 all felt existential at the time. Each one was accompanied by convincing arguments as to why “this time is different.” Each one triggered panic selling somewhere in the system.
And yet, for long-term investors, these periods did not derail financial plans. Equity markets recovered, dividends continued to be paid, and capital growth resumed. In many cases, the strongest long-term returns were generated by those who invested through periods of uncertainty rather than avoiding them.
Volatility has never been the thing that destroys long-term plans. Poor decisions made during volatile periods are far more dangerous.
Why calm matters more than prediction
One of the most valuable roles of a wealth manager is not forecasting markets or timing entries. It is helping clients remain calm when markets behave exactly as they always have. Short-term market movements are unpredictable by definition. If they were predictable, they would already be priced in.
What is predictable is behaviour. Fear leads to selling after losses. Confidence leads to buying after gains. Both are the opposite of what long-term investing requires. Remaining invested during volatility is rarely comfortable, but it is almost always necessary.
A well-constructed financial plan is built with this reality in mind. It assumes that markets will fall at times, sometimes sharply. It assumes that different regions and sectors will move out of sync. It also assumes that recoveries will follow, even if the timing and path are unknown.
The discipline is not in avoiding volatility. It is in accepting it without reacting emotionally.
If we look back across financial market history, the pattern is remarkably consistent. Sharp drawdowns are followed by recoveries, and those recoveries go on to form part of the long-term upward trend. The events change, but the behaviour does not.
The oil crisis of the 1970s, Black Monday in 1987, the dot-com crash, the global financial crisis, the eurozone debt scare, the COVID sell-off, and the inflation and rate shock of 2022 all felt existential at the time. Each one was accompanied by convincing arguments as to why “this time is different.” Each one triggered panic selling somewhere in the system.
And yet, for long-term investors, these periods did not derail financial plans. Equity markets recovered, dividends continued to be paid, and capital growth resumed. In many cases, the strongest long-term returns were generated by those who invested through periods of uncertainty rather than avoiding them.
Volatility has never been the thing that destroys long-term plans. Poor decisions made during volatile periods are far more dangerous.
Why calm matters more than prediction
One of the most valuable roles of a wealth manager is not forecasting markets or timing entries. It is helping clients remain calm when markets behave exactly as they always have. Short-term market movements are unpredictable by definition. If they were predictable, they would already be priced in.
What is predictable is behaviour. Fear leads to selling after losses. Confidence leads to buying after gains. Both are the opposite of what long-term investing requires. Remaining invested during volatility is rarely comfortable, but it is almost always necessary.
A well-constructed financial plan is built with this reality in mind. It assumes that markets will fall at times, sometimes sharply. It assumes that different regions and sectors will move out of sync. It also assumes that recoveries will follow, even if the timing and path are unknown.
The discipline is not in avoiding volatility. It is in accepting it without reacting emotionally.
Apologies to anybody who doesn't get the above reference!
The importance of time horizons
Volatility matters far less when time is on your side. A portfolio designed for long-term growth does not need smooth returns year to year. In fact, attempts to smooth returns often reduce long-term outcomes by limiting exposure to growth assets.
This is why time horizon is so central to financial planning. Money that is not needed for many years can tolerate short-term fluctuations because those fluctuations are irrelevant to the end goal. Over longer periods, the upward trend in growth assets has historically overwhelmed short-term noise.
By contrast, money that is needed in the near future should not be exposed to that same level of volatility. This is not a contradiction. It is a recognition that risk is not a single concept, but a function of both market behaviour and personal circumstance.
Why we de-risk ahead of known events
This is also why we reduce risk as clients approach a point where capital will be needed. Volatility may be a necessary part of growth, but it becomes a problem when it coincides with a withdrawal requirement.
If a client knows they will need access to funds for retirement income, property purchases, education costs, or other planned events, the portfolio must evolve accordingly. Growth assets do their job over time, but they are not suitable for short-term funding needs.
De-risking is not a reaction to market forecasts. It is a planned adjustment based on timing. By aligning the portfolio with the client’s future cash needs, we reduce the chance that short-term market movements interfere with long-term objectives.
Staying focused on what actually matters
Periods of volatility are not tests of markets. They are tests of investors. The long-term evidence is clear. Markets recover, growth resumes, and disciplined investors are rewarded for patience.
The real challenge is psychological, not mathematical. Staying invested, sticking to the plan, and ignoring short-term noise are far more important than trying to predict the next correction or rally.
Volatility is not a flaw in the system. It is the price paid for long-term growth. Understanding that, and remaining calm when it appears, is one of the most valuable lessons a wealth manager can help clients internalise.
Volatility matters far less when time is on your side. A portfolio designed for long-term growth does not need smooth returns year to year. In fact, attempts to smooth returns often reduce long-term outcomes by limiting exposure to growth assets.
This is why time horizon is so central to financial planning. Money that is not needed for many years can tolerate short-term fluctuations because those fluctuations are irrelevant to the end goal. Over longer periods, the upward trend in growth assets has historically overwhelmed short-term noise.
By contrast, money that is needed in the near future should not be exposed to that same level of volatility. This is not a contradiction. It is a recognition that risk is not a single concept, but a function of both market behaviour and personal circumstance.
Why we de-risk ahead of known events
This is also why we reduce risk as clients approach a point where capital will be needed. Volatility may be a necessary part of growth, but it becomes a problem when it coincides with a withdrawal requirement.
If a client knows they will need access to funds for retirement income, property purchases, education costs, or other planned events, the portfolio must evolve accordingly. Growth assets do their job over time, but they are not suitable for short-term funding needs.
De-risking is not a reaction to market forecasts. It is a planned adjustment based on timing. By aligning the portfolio with the client’s future cash needs, we reduce the chance that short-term market movements interfere with long-term objectives.
Staying focused on what actually matters
Periods of volatility are not tests of markets. They are tests of investors. The long-term evidence is clear. Markets recover, growth resumes, and disciplined investors are rewarded for patience.
The real challenge is psychological, not mathematical. Staying invested, sticking to the plan, and ignoring short-term noise are far more important than trying to predict the next correction or rally.
Volatility is not a flaw in the system. It is the price paid for long-term growth. Understanding that, and remaining calm when it appears, is one of the most valuable lessons a wealth manager can help clients internalise.
