For those new to trading and investing and are thinking about investing in Tesla, one of their early investors who is oftentimes very vocal about his investment strategies posted a thread explaining how to deal with volatility. Volatility can be very scary especially for first-time traders when big changes happen. 

What is Market Volatility

For those that aren't really familiar with what volatility means, it is basically the drastic shift in prices. Let's say the price is slowly going up then drastically goes down! This is what is called bearish. Volatility when the prices drastically go up and down and this can be scary for most first-time investors.

A particular Dave Lee, a long time Tesla investor said that it can be quite tough to hold on to the larger long-term winners especially when there is a lot of volatility involved. He also noted that every investor has to find their very own brain hacks in order to deal with the big ups and the big downs.

How to Handle Volatility

Lee then noted that volatility should be expected and that growth stocks are generally volatile due to their value being based on the future projected earnings as well as the value that investors initially place on those particular future earnings. This can then greatly change the total market conditions, sentiment, competition, and even growth rate.

He also noted that fundamentals are important and it is important to prioritize the business over the stock price. He then gave tips to look for an exceptional company that is reportedly outperforming its expectations over the long-term period. This will usually see their own stock price follow despite periods of certain consolidation and even drawdown.

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Techniques to Value Your Portfolio

Portfolio value glasses usually distort everything and in order to fix this, Lee actually tries to value his portfolio and even his paper gains at just less than half in order to put in volatility. It also reportedly helps him to not easily be tortured by most of the big ups and downs.

Lee then said that it is important to zoom out to usually 1 year or even a 5 year perspective in order to help get an edge over the whole week or month view. He noted that 50% drops in growth stocks can actually be normal. He then shared his video where he explains his thoughts on volatility.

When it comes to new time investors, it is very important to learn more about investing before putting in money and losing it due to making the wrong moves. Make sure to follow the right people, listen to the right advice, and don't fall for scams online promising the "secret technique" to trading which is usually a scheme to get people to spend on their training. Learn how to do technical and fundamental analysis to make decisions of your own!

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Written by Urian B.

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