Volatility means opportunities

Source: Ang of Phillip Capital Management Sdn Bhd

Volatility means more opportunities to make money especially when we are able to buy at a low and sell at a high. Hypothetically, substantial profit can be made if we are able to buy at the bottom of the market and sell at the top.
Because of the big swing in our market, partly due to frequent flow of funds by international fund managers, such opportunities always occur if we wait patiently.
Looking at past patterns, this sounds easy. In reality, spotting the bottom and peak of a market is not easy as we see the market evolve day by day, from bullish optimistic phase to bearish pessimistic period. By the time we notice a correction has evolved into a bear market, it could be too late to sell.
Similarly in a bull market, the initial run-up is always misunderstood to be a bear trap. It’s always easier to speak from hindsight. Even if we do not know exactly where the bottom of the market is, it is definitely a bargain to buy when the market has fallen 20-30% from its peak with some stocks plunging by 40-50%.
Because we are not sure whether the market has reached the bottom at the point of purchase, we can always keep some cash for future averaging purposes, just in case the market falls further. If the market recovers after the first purchase, we are happy because we have made some money from the shares just bought. If the market goes down further, we are also happy since we can now buy cheaper. In this way, we can benefit from the down market as well as manage our sentiment.
Similarly, when the market recovers substantially, perhaps it is time to lock in some profit by selling some of our positions. If the market goes up further, we still have some shares in hand to sell.
Investment guru Warren Buffett makes his money by buying into investment-grade stocks at market bottom. His cheaper entry cost allows him to keep the shares for many years without selling. If he could have sold some of those shares bought at market bottom when they are high, he could have made more.