behaviour
Volatility is the fee, not a fine
The rule
Market ups and downs are the entry fee for long-run returns, not a fine. Like the bumps on a long bus ride to a good place, not a sign it's broken.
Where it flips
But not every drop is a harmless fee. Some are permanent damage. The fix is to tell apart a spread-out market swing (a fee) from one fragile bet that may never come back (a fine).
Every asset that pays good long-run returns comes with swings along the way. Treating those swings as a fee you gladly pay, not a fine to run from, is what lets you stay invested long enough to actually get paid.
A worked example
A broad index SIP falls 30% in a crash. The investor who reads the drop as the entry fee keeps buying and recovers. The one who reads it as a fine sells at the bottom and turns a paper dip into a real loss. [illustrative]
How to spot it
- ·panic at an ordinary dip
- ·expecting returns with no swings
- ·confusing a broad-index dip with a broken business
Morgan Housel · The Psychology of Money