The Financial Crisis of 2008 brought to markets more frequently something that was not a household word: Volatility. Since 2008, there have been many days of wild swings in the market and the average trader or investor simply started dreading the thought of going for wild swings that once dominated the investing landscape. Volatility has completely damaged the psyche of the average investor and we thought it might be useful to bring this to perspective.

How can an average or newly developing investor deal with this market phenomenon that appears will be staying with us as an unwelcome visitor for a long time. We think an effective way to deal with volatility is to understand why it has now become such an important part of the market. Investors who understand that volatility stems from uncertainty will most likely be able to resolve this effectively and adjust their tactics.

There is plenty of uncertainty that's doing the rounds not only in investing but also in main street. Uncertainty evokes mixed reaction that changes with the emotion of the day. In investing it unfolds in the form of volatility fed by the short term events that impact the investing landscape. Now politics, finance, unemployment, sentiment all feed collectively in larger portions than before and the result happens to be what we call volatility.

In order to clearly deal with volatility, the average investor has to be clear about his or her purpose of investing. This purpose of investing is also somewhat defined by the duration by which he or she expects to see the purpose getting resolved. If the average investor is expecting results to happen in a shorter timeframe volatile markets may not be willing to help but if the same investor is expecting results to happen over a longer time horizon then the effects of the short term changes in his/her portfolio will not cause the same impact.

In short, the best way to deal with volatility is to understand the purpose and duration of investing to which the investor has committed to. The longer the duration of investing the smaller will be the impact of volatility on the sentiment to the investor.