Warren Buffett On Volatility

Market sell-offs such as this generate a lot of fear.  Wall Street uses the term volatility to specifically mean a decline in stock prices.  Volatility works both ways but presumably investors for the most part don't mind when stock prices spike higher.  It's the concept of losing money in a short period of time that most investors dislike.  Warren Buffett has over the years opined on volatility and market declines.  I thought I'd share these for your consideration. 

“The unconventional, but inescapable, conclusion to be drawn from the past fifty years is that it has been far safer to invest in a diversified collection of American businesses than to invest in securities — Treasuries, for example — whose values have been tied to American currency. That was also true in the preceding half-century, a period including the Great Depression and two world wars. Investors should heed this history. To one degree or another it is almost certain to be repeated during the next century.

Stock prices will always be far more volatile than cash-equivalent holdings. Over the long term, however, currency-denominated instruments are riskier investments — far riskier investments — than widely-diversified stock portfolios that are bought over time and that are owned in a manner invoking only token fees and commissions. That lesson has not customarily been taught in business schools, where volatility is almost universally used as a proxy for risk. Though this pedagogic assumption makes for easy teaching, it is dead wrong: Volatility is farfrom synonymous with risk.Popular formulas that equate the two terms lead students, investors and CEOs astray.”

http://www.businessinsider.com/warren-buffett-on-risk-and-volatility-2015-4