In this episode my (Ai) "friends" returned to discuss my article on why volatility HELPS smart and patient investors ...

For patient set-and-forget investors, the recent tariff-driven volatility was overdue and welcome.

Pullbacks enable long-term investors, like myself, to accumulate quality assets at better prices. As Warren Buffett says:

“The Stockmarket is a device for transferring money from the impatient to the patient”

We do this by pound-cost-averaging. This is working well for our investors now, and always works to grow and compound our portfolios at opportune times.

Markets don’t rise in a straight line: Pull-backs are healthy …

.. and normal. In fact, that’s exactly why markets have returned 8-10% pa, on average, since day-dot. Because volatility isn’t loss. The chart below shows how stocks have grown over the last 50+ years but certainly not in a straight line …

WHY Volatility helps us …

Think about it: if stocks had zero volatility and grew in a straight line, the whole world and their dog would be fully invested in stocks.

If everyone was fully invested, there would be no risk premium and no new money entering the market. Stock returns would then be risk-free and equal to cash savings rates.

It’s a shame that market fluctuations and perceptions discourage the majority of people from investing. In the UK only 23% of people actively invest in stocks, according to Hargreaves Lansdowne. In the US that’s a lot higher.

And because the majority of people stay on the sidelines, earning cash returns that are lower than the real inflation rate, that then creates the risk-premium which enables those higher stock returns.

Markets Always Rise - But Never in a Straight Line