“Volatility Is a Feature, Not a Bug”

Every time the S&P 500 drops 2–3% in a single session, Malaysian news outlets light up with dramatic headlines. Social media fills with warnings. Local investors raise their eyebrows: “The US market looks too unpredictable right now.”

This caution is understandable — but it may be limiting Malaysians from accessing one of the world’s most powerful wealth-creation opportunities. The core issue is a confusion between two very different concepts: volatility and risk.

Volatility is the speed and magnitude of price movements. Risk is the permanent loss of capital. Confusing them leads to an opportunity cost: focusing exclusively on local markets, while one of the greatest wealth-creation engines in history sits fully accessible from your phone.

If you are a swing trader or intraday trader, volatility is not something to fear. It is your entire business model. Without price movement, there is literally no profit opportunity.

The S&P 500 has an average daily range of approximately ±0.75%. The E-mini S&P 500 futures average 45–80 points daily — a single contract can produce $2,250 to $4,000 in price movement in one session. The Nasdaq 100 moves even wider, averaging 200+ points daily.

A swing trader targeting a 3% move on a US stock with USD 50,000 capital captures USD 1,500 per trade. The US market’s depth and daily range open up a significantly wider opportunity set for active traders seeking short-term price movements, complementing local market participation.

Over the past 20 years (2005–2024), a $10,000 investment in the S&P 500 with dividends reinvested grew to approximately $71,742 — a 617% total return at 10.35% annualised. The same RM10,000 in the FBM KLCI grew to RM15,412, an annualised rate of 2.19% per year.

The 10-year picture reveals an even wider gap. The S&P 500 delivered an annualised return of +13.10%, turning $10,000 into $34,257. The KLCI delivered an annualised return of negative 2.28%, with RM10,000 seeing negative returns over that same period.

Metric	S&P 500	FBM KLCI
20-Year Annualised Return	+10.35%	+2.19%
10-Year Annualised Return	+13.10%	–2.28%
Positive Years (Last 20)	17 of 20	9 of 20
$10k after 20 Years	$71,742	RM15,412
$10k after 10 Years	$34,257	RM7,940

A Morningstar study covering 150+ years of market data identified 19 bear markets since 1871 — including the Great Depression (–79%), Dot-Com Bust (–49%), the 2008 Financial Crisis (–57%), and the COVID-19 crash (–34%). Every single one was followed by a full recovery and eventual new all-time highs.

The pattern is consistent: market downturns are temporary, but long-term growth has proven to be durable.

The Cost of Missing the Best Days

Between 2005 and 2024, $10,000 fully invested in the S&P 500 grew to $71,750. But missing just 10 of the best trading days — out of over 5,000 — slashed that ending value to only $32,871, less than half. Missing 60 best days would have reduced the portfolio to a mere $4,712.

Important context for traders: JP Morgan’s research tracks purely passive investors who panic-sold and never re-entered. This is not about disciplined traders using stop losses. A stop loss is a planned, systematic exit to protect capital. The real wealth destruction happens when investors exit on emotion and then wait indefinitely on the sidelines. The SVS Framework teaches both sides: the discipline to exit with a stop loss, AND the systematic strategy to re-enter when conditions confirm.

The Ringgit Factor: A Currency Consideration

The Malaysian ringgit weakened from approximately RM3.27 per USD in 2014 to around RM4.50 at its weakest in 2023. Those with USD-denominated assets benefited from both investment returns and the currency appreciation. This currency dimension is an important consideration for Malaysian investors building a diversified portfolio.

Buffett’s message is consistent and unambiguous: volatility is not risk. Risk is the permanent loss of capital — buying a bad business, using excessive leverage, or panic-selling at the bottom. A well-run company’s stock price fluctuating 20% in a year is simply the price of admission for superior long-term returns.

The S&P 500’s 93% success rate across all rolling 5-year periods since 1926 tells you everything you need to know about where patient capital has historically been rewarded.

Year	Warren Buffett on Volatility
1987	“Erratic markets are ideal for any investor, small or large, so long as he sticks to his investment knitting.”
1992	“We not only accept this volatility but welcome it: A tolerance for short-term swings improves our long-term prospects.”
1993	“The true investor welcomes volatility. A wildly fluctuating market means irrationally low prices will periodically appear.”
1997	“As an investor, you love volatility. You love the idea of wild swings because it means more things are going to get mispriced.”

The data shows clearly that avoiding the US market purely due to volatility concerns has come at a significant opportunity cost. The evidence is compelling:

For Traders	Volatility creates opportunity. The US market’s depth, daily range, and liquidity open up trading possibilities that complement local market participation.
For Investors	Volatility is irrelevant noise that fades with time. Over 20 years, $10k in the S&P 500 grew to $71,742 vs RM15,412 in the KLCI. The higher-volatility market delivered significantly stronger long-term returns.
Every Crash	Every major crash in US market history has been fully recovered, followed by new all-time highs. There have been 19 bear markets since 1871 — all recovered. Volatility is temporary.
Stop Losses	Stop losses are a disciplined, planned exit to protect capital — NOT the same as panic selling. The key is a systematic re-entry strategy, so you protect capital AND participate in the recovery.
Currency	Ringgit-denominated assets faced headwinds from both lower equity returns and currency movement against the USD between 2014 and 2023. USD-denominated assets benefited from both appreciation and currency tailwind.

This article is for educational purposes only and does not constitute financial advice. Past market performance is not indicative of future results. All figures sourced from publicly available data: Slickcharts.com, Tickerfunds.com, JP Morgan Asset Management, Morningstar, StashAway Research, Bursa Malaysia.