Stock Market Volatility is your Friend!

November 21, 2011 2:03:00 PM

Volatility is good for you.

- Warren Buffett

I obviously spend a lot of time listening to financial experts and reading commentary from various sources on the subject of investing.

What I find interesting is, although many experts say they are in the investment business, as I listen to the experts\, I find it ironic that very few actually discuss the fundamentals of successful investing and the risks associated with market volatility.

As a long time avid listener of CNBC, I have listened to so-called experts come and go talking about what they perceive as the idea of investing and their investment ideas. I rarely hear anyone talk about the benefits of volatility and how it benefits investing.

Now, I realize that many of you may be saying to yourselves right now...

What??? Volatility???

Absolutely! Volatility is an investor's best friend! Why is that? Because if you truly are an investor in companies and not the stock market, then volatility is the one thing that provides investors the opportunity to continue to invest in the companies they want to own, on sale. After all, isn't investing about buying companies on sale?

To me, investing includes the critical component of controlling emotions and the stock market is nothing more than a gauge of people's emotions.

Why do I say that? Because it is the emotions that create the volatility and it is the volatility that creates opportunity. As investors, we should view volatility as our opportunity to purchase more of the investments we WANT to own and not sell the investments we SHOULD own.

As we look back over the last several years, I think it is important as investors to take a step back and look at what has happened. We have seen several periods of extreme volatility. Certainly more extreme than normally seen, and for a longer period than we normally see in market corrections. Yet, we have also seen tremendous opportunities to take advantage of that volatility and invest in quality companies.

In retrospect, we can now look back and see that as I wrote many times during the down turn in 2008 and 2009, this truly has been a tremendous period to take advantage of market volatility and invest in quality companies. Frankly, if you really are an investor, isn't 2 years really short-term? I realize it may seem like an eternity. But, if you look back at the history of the stock market, every correction, depression and market downturn has eventually led to the markets going higher.

As it has been said many times, Be fearful when others are greedy and greedy when others are fearful. Looking back over the last two years, I would say that statement is dead on.

Mark Pearson
President & CIO
Nepsis Capital Management&trade\;, Inc.


Mark Pearson

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