After a year of astonishing return from the market, which is not the norm, market is again seeing some volatility (which is the norm).

Many new investors have “joined” the market in the 1st half of 2021. The volatility seen in recent times may not be something that these new investors are comfortable with.

When i first started investing in the stock market back in 1997, it was the same experience. I remembered I had the “give it to me and give it to me NOW’ mindset and expect to make money immediately after taking on a position. Of course, this is not how the market works.

Different investors have different investing objectives. Some who are retirees need to manage their risk and capital preservation is key. Instruments like bonds will be something more appropriate for this group of clients. Within the bond space, there are further methods to select the “correct” bonds to buy too. Some investors have suffered financially after buying the bonds that give them the highest return. Again, it doesn’t work that way. Bonds are sensitive to the interest rates environment and there are strategies to tackle bond investing. I am not going to bore you with the technicals of it here.

As for the equities investors, buying into companies are simply buying into the future business of these companies. They are not going to see that forecasted cashflow tomorrow. I usually affixed a target period of around 1-2 years (I can’t see anything beyond 3 years to be honest). I am very skeptical about those who tells me that they can forecast what will happen to the market in periods of more than 3 years.

I am 80% a macro strategist, more skewed towards a top-down approach, and a 20% bottom-up one. For my personal portfolio, i do take short term positions employing technical analysis but this is not for everyone. I would always tell my friends to take a longer term view when it comes to their investment (2-3 years) in order to see clear results. This requires patience, lots of it. Market will tend to swing your emotions at regular time intervals. But if you have participated setting your objectives right at the start and have done your homework, this volatility should not be causing you to make decisions in the midst of your investing.

Volatility is part of the game and investors will need to know that. It wouldn’t be the stock market without that volatility. And please do not take the 2nd half of 2020 as the market norm. It was recovering from a crisis and global governments were implementing fiscal and monetary policies to ensure that economic conditions were not worsening. Laymenly, I would say that during this period of time, the market was been “manipulated” by the government around the world. It is not easy to go against their wishes as they had the resources and willingness to see that the capital markets condition improved to ensure financial stability within their economies. But once we are back on track, these additional liquidity is expected to be withdrawn from the market. When this time comes, the market will have to solely depend on its own capabilities to move higher.

Based on statistics released since the start of 2021, we are quite convinced that we have passed the worst of the crisis with increased vaccinations and global travelling slowly emerging. Governmental policies can only bring us thus far and going forward, we need to be selective in stock selections, with macro developments closely watched.

I continue to see heavy volatility from now till at least the start of October this year as the market adjust to the new macro fundamentals. This volatility presents us with opportunities to buy some companies at a discount in view of their potential in the next 2-3 years, when we fully recover from the global pandemic. So be very patient, and do not be easily swayed by your emotions when the market starts pulling back. The chances of a double dip has greatly reduced over the last one year. And it is perfectly normal for the market to undergo a correction after moving higher and this will keep the market healthy in the longer term. I will be very afraid if the market operates on a straight line up to be honest.

Embrace volatility and profitable investing.