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Introduction
Market ups and downs often scare investors. Volatility feels like chaos — prices drop, emotions run high. But is it really the villain we think it is? Or can volatility be your friend in disguise? In this blog, we explore how volatility can either destroy returns or enhance them, based on how you react — using the story of two investors, Rakesh and Naina.09/06/2025
Volatility is the degree of market price fluctuations — how rapidly and unpredictably prices move in short time frames.
High volatility often leads to panic. Investors fear losing money and may exit at the worst time.
But it also creates buying opportunities — especially for disciplined, long-term investors.
Enemy View: Panic Selling
For many, volatility is a trigger for fear-based decisions. They react emotionally, redeem investments, and lose out on rebounds.
Example: Rakesh
In 2020, Rakesh saw his equity mutual fund drop 25% during the COVID crash. He panicked and exited. By the time he re-entered 8 months later, the market had recovered over 30%. His 3-year CAGR: 6.8%.Opportunity View: Staying Invested
Those who see volatility as a chance tend to stay invested or increase contributions during market dips.
Example: Naina
Naina stayed calm, continued her SIPs during the same period. Thanks to rupee cost averaging, she bought more units at low prices. Her 3-year CAGR: 12.3% — nearly double Rakesh’s!Key Takeaways
| Viewpoint | Volatility as Enemy | Volatility as Opportunity |
|---|---|---|
| Reaction | Panic, redemption | Stay invested or invest more |
| Outcome | Miss rebound, low returns | Compounding & averaging benefit |
| Best Approach | Exit & re-enter later | Consistent SIPs, long-term view |
Conclusion
Volatility is like a rollercoaster — scary if you're unprepared, thrilling if you’re buckled in. Rather than fearing it, investors should embrace it with discipline, automated SIPs, and a long-term mindset. Let volatility work for you, not against you.
Don't let fear guide your investments. Automate your SIPs, trust your asset allocation, and let volatility create wealth over time — not anxiety.
Summary Table: Volatility – Enemy vs Opportunity
| Approach | Avg. Return (3–5 Yr CAGR) | Avg. Risk (Volatility) | Avg. Investor Behaviour |
|---|---|---|---|
| Panic Sellers | 6% – 7% | High (25–30%) | Emotional exits, missed recoveries |
| Disciplined Investors (SIP) | 10% – 12% | Medium (15–18%) | Continued SIPs, long-term focus |
| Tactical Volatility Investors | 12% – 14% | High (20–25%) | Buy-the-dip mindset, opportunistic |
Dr. Satish Vadapalli
Research Analyst
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