How Much Volatility Did You Experience in 2015?

volatility aheadWe are quickly coming to the end of 2015. The S&P 500 ended 2014 at 2059. It is currently 2061. Just about flat. If you include dividends, the return for 2015 has been just over 2%. For someone not paying attention, it appears the market was pretty boring in 2015.  

Except the problem is that most investors pay attention…too much attention. Many investors like to watch the market and stay on top of the financial news. For what purpose do we tune in? Many say it is to stay informed. Perhaps. But what is for sure is that people who keep up with stock quotations and the news of the day will experience much more volatility than investors who ignore the “noise”.

Volatility of 2015

In 2015 we had a bit of noise. Greece potentially leaving the Euro in June and the China slow down in Aug/Sept resulted in a lot of media attention and short-term losses. Surely some investors were influenced by the noise and volatility to sell stocks, as evidenced by the market going down. But those losses were short term.

In many aspects of life additional information is a benefit. But I sincerely question the value of financial information to a true long-term investor. It may help speculators and market-timers, but not investors. It seems that financial information (stock quotations & media) often does more to hurt investors than to help. At the very least it causes investors to experience more volatility than an investor who doesn’t tune in.

Volatility in 2016?

So how will the markets perform in 2016? No one knows. But what we know for sure is that the market will go up and down, and we know for sure that the media will feed us plenty of noise. We know the markets will be volatile, and we can’t control that. But you can control how much volatility you personally experience.