Volatility caused by money managers who speculate irrationality with huge sums will offer the true investor more chance to make intelligent investment moves.  He can be hurt by such volatility only if he is forced, by either financial or psychological pressures, to sell at untoward times” Warren Buffett

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"This great emphasis on volatility in corporate finance we regard as nonsense" Charlie Munger

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“Opportunities to purchase what we deem to be attractively undervalued companies occur more frequently when stock prices are volatile.” Chuck Royce

Seth Klarman Describes His Approach In Rare Harvard Interview

Seth KlarmanIn a rare interview with Harvard Business School that was published online earlier this month, (it has since been taken down) value investor Seth Klarman spoke at length about his investment process, philosophy and the changes value investors have had to overcome during the past decade. Klarman’s hedge fund, the Boston-based Baupost has one of Read More


“We steer clear of the foolhardy academic definition of risk and volatility, recognizing, instead, that volatility is a welcome creator of opportunity” Seth Klarman

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Risk is not defined by volatility, but rather ill-conceived investment” Michael Burry




"Volatility is not synonymous of risk but – for those who truly understand it – of wealth" Francois Rochon

"We do not view volatility as risk" Tweedy Browne Co

"Investors should treat volatility as a friend.  High volatility permits an investor to purchase stocks that are particularly depressed and to sell stocks when they are selling at particularly high prices.  The greater the volatility, the greater the opportunity to purchase stocks at very low prices and then sell stocks at very high prices"  Ed Wachenheim

“We think short-term volatility should often be viewed as an opportunity to the long-term investor who seeks enduring businesses at reasonable prices” Christopher Begg

“We are willing to endure a high degree of stock price and portfolio volatility because we believe it allows us to achieve a greater degree of investment performance over the long term” Bill Ackman

“The true investor welcomes volatility” Warren Buffett

"Volatility actually is the opposite of risk.  It’s is opportunity.  But you need to think through and fight some basic human weaknesses.”   Jeff Ubben

"I have never thought of volatility as a measure of risk.  The investment business tends to think there is some correlation between volatility and risk and I don't think that is true.  We are not concerned with price fluctuations and to the extent that the price drops, we can take advantage of that and can buy more of the same thing" Mohnish Pabrai

“You can get lulled to sleep when markets haven’t been volatile, which likely means it’s time to take some chips off the table” Kevin O’Brien

"Not only doesn't a stock's past price volatility serve as a good indicator of future profitability, it doesn't tell you something much more important - how much you can lose.  Let's repeat that: It doesn't tell you how much you can lose.  Isn't risk of loss what people most care about when they think of risk?" Joel Greenblatt

“There are many kinds of risks .. But volatility may be the least relevant of them all” Howard Marks

“If you make more money when you are right than you are hurt when you are wrong, then you will benefit, in the long run, from volatility [and the reverse]” Nicholas Taleb

“You can’t overlook the volatility, but you don’t let it push you around in the market” Boone Pickens

Volatility is the friend of the unleveraged long-term investor. We much prefer the bumpy road to higher rates of return than a smoother rise to more modest profits” Bill Ackman

"Most investors incorrectly consider volatility to be a risk.   These investors thus demand a higher return from common stocks than the deserved return.  This error is our opportunity - this is another reason we treat volatility as a friend" Ed Wachenheim

“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.” Warren Buffett

“One of the great lessons on the crisis was learning the difference between volatility, which most people perceive as risk, and a permanent impairment of capital, which is what we believe is risk” Matt McLennon

“While many investors think of volatility as synonymous (or nearly so) with risk, we take a different view. Rather than avoid volatility, we see the challenge of managing risk as trying to take advantage of the market’s movements—an essential skill for any successful active manager.” Chuck Royce

“Risk is a far more complex consideration than merely the simple but widespread notion of volatility” Paul Singer

“Pick any Company you want – the price is very volatile over short periods of time. It does not make sense to me that their values are nearly as volatile as the prices and therein lies what should be a great opportunity” Joel Greenblatt

"Volatility is our friend.  Volatility has nothing to do with risk" Mohnish Pabrai

"Volatility is terrific. What we don't want is the permanent loss" Wally Weitz

"If we insist on a significant margin of safety at the time of purchase, above-average volatility may well provide above-average returns.  Rather simple, when you ponder it a while" Frank Martin

"I think volatility is so widely used as a risk-metric simply because it is easy to measure, not because it is a good gauge of risk of permanent loss of capital.  Downside volatility is merely one aspect of risk, not necessarily the most important, while upside volatility isn't much of a risk at all - unless you are short" Joel Greenblatt

"Another important point: the significant volatility of the market is often perceived negatively by many investors. It’s actually the contrary. When we see stock prices as “what other people believe the company is worth” rather than the real value (at least in the short term), these fluctuations become our allies in our noble quest for creating wealth. Instead of fearing them, we can profit from them by acquiring superb businesses at attractive prices." Francois Rochon

“I certainly view volatility as my friend. Volatility is on sale because 99% of the institutions out there are doing their best to avoid it.” Michael Burry

"Financial academics define risk as volatility.  That may be fine for theory, but for those of us who live in the real world, we define risk as permanent loss of capital.  The likelihood of risk using our definition is always highest at the point where the general perception of risk is lowest"  Christopher Bloomstran

"When people do try to measure investment risk, they typically assess the historic volatility of an investment compared to that of the overall market (known as beta), which derives from capital asset pricing theory. We consider the concept of beta to be irrelevant, both because volatility is not the same thing as risk and because one cannot reliably project past share price patterns into the future. (It is, of course, fortunate for us that others remain so misguided.)" Seth Klarman

"If you want to start talking volatility equals risk, sharpe ratios, beta and gamma, the Greek alphabet, we're not a good match for you" John Phelan

"Volatility is not part of our analysis of risk; rather we view it as an opportunity generator.  What we say for our purposes is that risk involves the exposure of permanent loss of capital" Chuck Akre

"In the first place it has been known for decades that there is no correlation between risk, as the academics define it, and return.  Higher volatility does not give better results, nor lower volatility worse.   Volatility is not risk.  Avoid investment advice based on volatility"  David Dreman

"How can professors spread this [nonsense that a stock's volatility is a measure or risk]? Ive been waiting for this craziness to end for decades. It's been dented, but it's still out there" Charlie Munger

"Because we focus on value instead of price, we do not consider short-term stock market volatility a risk. Instead, we define risk as long-term value destruction. For today’s investors, the potential loss of purchasing power on the dollars they save is one of the largest value-destroying risks they face" Chris Davis

Article by Investment Master Class


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