Image: Bigstock

Key Takeaways

• Volatility can often provide strong opportunities for investors to add top-tier companies at a relative discount.
• Long-term investors should remain confident in their thesis while muting short-term noise.

It has been an absolute battlefield within the market over recent days, with stocks facing notable pressure due to newly announced tariffs. While day traders may welcome the volatility, the same can’t be said for long-term investors who don’t benefit from significant intraday price swings.

Though nobody likes to see their stocks get hammered, the negative price action could be a blessing in disguise from a long-term standpoint, allowing investors to scoop up shares at a relative discount and ride the wave back up.

Remain Confident

Whether it’s robust future growth expectations, rock-solid quarterly results, or a dividend-focused strategy, there is always a reason why investors get into a stock. Long-term investors have little reason to exit a position if the original investment thesis hasn’t been negatively impacted. Simply put, the longer-term picture should remain in focus, while short-term noise should be kept in check.

This chart of Palantir (PLTR - Free Report) is a great example of holding onto conviction. It would've been a massive mistake if an early Palantir investor sold against their confidence and belief in the coming AI revolution during 2021-2022. After all, Palantir shares have moved up 780% over the past five years.

Image Source: Zacks Investment Research

Build A Stronger Position

It’s impossible to time the market just right. The saying, "buy low, sell high" is hardly helpful – if investors could consistently and accurately forecast these levels, the market would have no balance.

Of course, there is also the "buy the dip" approach. And let's be honest here – many people buy the ‘dip,’ yet it just keeps dipping. That’s never fun.

One of the best ways to build a more prominent position for your long-term winners is the simple approach of dollar-cost averaging. Dollar-cost averaging is a strategy in which investors spread their purchases periodically, helping reduce the impact of volatility and overall constructing a more balanced position.

Dollar-cost averaging allows investors the flexibility to "buy the dip" and add to their winners. It’s overall a great way to build a strong position, as no investor wants to see an initial buy take a massive hit and have no more capital to deploy.

For example, NVIDIA (NVDA - Free Report) investors potentially added NVIDIA shares at valuation levels not seen since early 2023.  NVIDIA shares were recently seen trading at a 24.1X forward 12-month earnings multiple, while the PEG ratio was seen sitting at 0.9X.

Image Source: Zacks Investment Research

Bottom Line

Volatility can often present opportunities in the market to buy shares of top-tier companies at a relative discount. Though it may be a major thorn in the side of stocks currently, volatility could be a blessing in disguise from a longer-term standpoint.

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