For investors, volatility has been the name of the game throughout much of 2020. The panic and uncertainty brought on by the coronavirus disease 2019 (COVID-19) pandemic cost the benchmark S&P 500 34% of its value in a stretch of less than five weeks. Subsequently, it took less than five months for the broad-based index to essentially gain everything it had lost back.
This volatility is a blessing in disguise for long-term investors, as it allows them to scoop up innovative businesses on the cheap. But for short-term traders or novice investors who don’t know any better, volatility can prove tempting and dangerous.