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 can 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 the focus, while short-term noise should be kept in check.

This chart of Palantir PLTR has been 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. Palantir shares are 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 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 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 investors can currently add NVDA shares at valuation levels not seen since early 2023.  NVIDIA shares currently trade at a 24.1X forward 12-month earnings multiple, with the PEG ratio sitting at 0.9X.

Image Source: Zacks Investment Research

Bottom Line

Volatility presents 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 can be a blessing in disguise from a longer-term standpoint.

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NVIDIA Corporation (NVDA) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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