⏳ Reading Time: 6 minutesWhen we set out on a long journey, the mishaps and inconveniences along the way are often things we want to forget as quickly as possible. Once we reach our destination, our brains tend to overlook these details: the traffic, the bad weather, the delays, the discomfort. Yet when we are stuck on the motorway or waiting for a flight that is already hours late, it can feel as though there is no other problem worth our attention.
For investors, a similar logic applies. In hindsight, the final outcome of an investment plan is what matters most, but the journey also counts, especially when things do not go according to plan.
This aspect is not always recognised by investors. If you have ever asked someone how their investments are performing, you have probably asked: “How much has your portfolio grown?” Focusing on performance is perfectly logical, but it only captures half of the story. The other half is called volatility, an equally important aspect of investing whose management is often overlooked or taken for granted, particularly by non-professional investors.
Technically, volatility is a statistical measure indicating how much the performance of a portfolio fluctuates and deviates from its average over time. From an investor’s perspective, it represents perceived risk – how variable portfolio performance is. In other words, how quickly a portfolio grows during positive phases and how quickly it loses value during negative ones.
