From Ball Bearings to Bull Markets: Lessons in Volatility
Mike LeGassick ?? Author and Behavioural Investment Coach
The unvarnished truth around financial planning, guiding you towards an independent and dignified retirement | Voted 4.9 out of 5 on VouchedFor by my clients | 30 years’ plus experience | “Life is not a rehearsal” ??
In the realm of investing, the journey of a ball bearing on a track—despite its simplicity—serves as a compelling metaphor for the stock market's dynamics. The video illustrates two parallel tracks: one flat and uniform, the other undulating with peaks and troughs. As the ball bearings begin their descent, a fascinating observation unfolds. The ball on the undulating track, subjected to a series of ups and downs, harnesses these fluctuations to gain momentum, ultimately reaching its destination more swiftly than its counterpart on the steady, flat track.
This scenario mirrors the experiences of investors in the stock market. Those who engage with more volatile investments often find that the very fluctuations which might seem perilous can, in fact, be advantageous. Each downturn, while potentially alarming, is invariably followed by an upturn, propelling the investment forward with renewed vigour. This cyclic movement, emblematic of the stock market's inherent nature, accelerates growth and can lead to more significant gains in a shorter period.
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On the contrary, the flat track represents the lower-risk, less volatile investment strategies—akin to bonds or savings accounts—where the path is steadier, but progress is gradual and slower. While these investments offer a sense of security and predictability, they lack the dynamic momentum that can lead to rapid growth. The comparative journey of the ball bearings illustrates that, while the steady path is less fraught with immediate volatility, it does not capitalise on the potential for acceleration and growth offered by navigating through volatility.
For the long-term investor, the lesson is clear: embracing the ups and downs of the market, much like the ball bearing on the undulating track, can be a strategy that leads to greater rewards. It highlights the importance of resilience and a long-term perspective, where the temporary setbacks are viewed not as deterrents but as opportunities for growth. The inherent volatility of the stock market, therefore, is not merely a challenge to be endured but a feature that, when navigated wisely, can enhance the journey towards one's financial goals.
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Chartered Financial Planner at Bourlet Consulting
9 个月Hi Mike, Sorry but I can’t let you off this one! As the son of someone who has worked in the ball bearing industry for nearly 50 years, (and is still going strong), I can tell you that you’ve made the classic mistake there. In the picture we are not looking at ball bearings, they are steel balls. I can hear the old man tutting and sighing right now.??