The idea that volatility equates to risk is a self-imposed dungeon constructed by over-leveraged traders and those who lack understanding of the intrinsic value of the assets they own. In this article, I illustrate examples of how to–and how not to–navigate volatility, and how to play the game correctly so that volatility becomes an ally rather than an obstacle.
This mental model was designed to help investors make better investment decisions. However, you can also apply it to other areas of your life in order to be more efficient. You should always aim to operate within your Circle of Competence, because that is where your efforts will yield the highest reward.