Volatility Is the Price of Admission. You Simply Can't Get In Without It

"You’ll Know You’ve Succeeded as an Investor When Your Portfolio Declines More in a Day Than What You Once Made in a Year" - Nick Maggiulli

I believe it was Morgan Housel who said "Volatility is the price of admission." He wasn't wrong.

Success in investing isn’t measured by short-term gains, market timing, or even by how frequently you check your portfolio. It’s defined by your ability to endure market volatility without emotional reaction. A true sign of financial success is when your portfolio experiences daily swings that would have once kept you up at night—but you remain unfazed.

Many new investors dream of growing their portfolio to the point where it sustains their lifestyle and future goals. What they often fail to anticipate is that, along the way, they will experience temporary losses—sometimes in staggering amounts. If you have built a sizable portfolio, the market will eventually hand you a day where you "lose" more money in a single day than you once earned in an entire year. It’s at this moment that you’ll truly understand the nature of long-term investing.

Why This Happens

The larger your portfolio grows, the more absolute pound (￡) movements become amplified. For example:

• A 1% decline on a ￡50,000 portfolio is ￡500—a figure that might not cause alarm.
• A 1% decline on a ￡5 million portfolio is ￡50,000—a sum that would have once taken you months, or even a full year, to earn.

Yet, despite the larger numbers, the fundamental principle remains unchanged: these fluctuations are normal and expected in long-term investing. They are also relative. 1% is still 1% regardless of the number it is being attributed to, however, most humans think in terms of pounds, not percentages. This is why a temporary ￡50,000 drop feels a whole lot more painful than reporting it as a temporary 1% drop. Meh...

What Separates Novices from Seasoned Investors

Many investors claim they are comfortable with volatility—until they experience a significant downturn. At that point, fear and doubt creep in. However, seasoned investors understand that these market moves are a feature, not a bug, of the investment process. They know that:

• Wealth Compounds Over Time – Markets move up and down, but over the long run, patient investors are rewarded.
• Volatility Is the Price of Admission – There is no return without risk or volatility. A declining market provides the opportunity to buy more assets at lower prices. They are on sale! The stock market is the only market in the world where people run out of the store when everything is on sale. How crazy is that? But don't worry, this isn't your fault. It is the way we are hardwired. I explain why this is and more in my book Mind Over Markets
• Emotions Are the Biggest Threat to Success – The biggest mistake investors make is reacting emotionally, selling in panic, and locking in losses that could have been temporary. Decisions that many do and will continue to regret. Failed investors do this all the time and then wonder why their investments didn't do as well as patient investors did.

When You Reach This Moment, You’ve Won the Game

It’s counterintuitive, but if you can wake up, see your portfolio drop by six figures, and go about your day without stress, then make no mistake, you’ve truly succeeded as an investor. Why? Because you’ve internalised the reality that investing is a long-term game. Your focus has shifted from short-term fluctuations to long-term financial independence.

Warren Buffett once said, “The stock market is a device for transferring money from the impatient to the patient.” Those who panic and sell in downturns donate their wealth to those who remain steadfast. He also said "Investing is simple, but not easy." He is absolutely right.

Final Thoughts

A declining portfolio, in absolute pound terms, is not a sign of failure—it’s a sign of progress. It means you have built real wealth. The next time your investments drop by more in a day than what you once earned in a year, take it as a sign that you’re playing the game at a higher level. The real test isn’t avoiding downturns—it’s your ability to stay calm, stay invested, and stay focused on your long-term plan.

And if you can do that? You’ve truly succeeded as an investor.