August 2019 – Dealing With Volatility and Managing Your Emotions

by Sep 11, 2019Memos0 comments

The biggest thing holding back investors is how they choose to deal with volatility within their portfolio.  The goal is to handle volatility with a level of indifference and give 100% attention to the overall intrinsic value of your portfolio in relation to its current trading price.  Implementing this behaviour takes the emotion out of investing and boils down your process to what it should be, the careful study of available facts with the attempt to draw conclusions based on established principles and sound logic. 

Many investors experience the emotional pains of volatility on a day to day basis as they continually get feedback from Mr. Market through the constant feed of changing price quotes.  One day your portfolio can go up a bit and hence you feel very confident. The next day it might go down and you lose your confidence.  This constant feedback from Mr. Market can be a very tiring and be a very unproductive way to allocate your energy.

One should never perceive Mr. Market as someone who is “all knowing” or as being the final authority on all things price related in the stock market.  Mr. Market is very emotional and can be extremely wrong.  The only way YOU as an investor will ever be able to tell that is if you practice the careful study of available facts with the attempt to draw conclusions based on established principles and sound logic. This is all it takes.  It is the foundation of any good investment process.

The correct process promotes a multidisciplinary approach to solving problems and even though investing is not an exact science, a great deal of conclusions can be arrived at by applying probabilities and a margin of error when deciding on what price to buy a security.  In order to be the most businesslike investor that you can be, you must act, practice and make decisions like one, where your opinion on businesslike matters does not change when the facts do not change.

In today’s market, investors have been overcome with fear due to an inverted yield curve and an escalating trade war. Of course, this should be a concern for people who care deeply about the short-term health of the overall economy and how it applies to their long-term employment prospects, but as a stock picker you need to be indifferent with the macro environment and solely focus on the intrinsic value of individual securities.  Do not compare the price you bought a stock for 6 months ago versus today.  You should only be concerned about the discount of a stock price compared to your estimated intrinsic value relative to other investment opportunities out there.

For many, reading the headlines of CNBC too much can cause you to have very uncomfortable feelings about your portfolio of stocks if they go down 10-20% in the short time period.   This is a natural emotional reaction.  In good times, when prices are expensive, we often hope that the market drops so that we can buy stocks at bargain prices, however, we often forget what that type of environment feels like and the emotion that comes along with it.

What separates good investors is how they deal with their emotions at the most difficult times.  Based on the investor’s original thesis, they should be excited if they have more available cash to invest at a lower price level, when most people will get scared, panic and sell some of their holdings. 

It is important to detach yourself from emotional swings when looking at the prices of stocks. You need only to reflect on the stocks discount or premium to your estimated intrinsic value.  Learn how to allocate your portfolio to the best stocks with the highest probability of an acceptable return while ignoring volatility.

If you have any suggestions, comments or feedback that you would like to share feel free to email me at

Enjoy the Journey,

Alex Middleton


Welcome to!

My name is Alex Middleton and I am from Calgary, Alberta.  I believe investing requires one to carefully study publicly available information in an attempt to develop a thesis based on reason and logic.  It also requires one to properly account for the unknown by applying probabilities and margin of safety to their thesis.  I hope you enjoy the content!