How to Handle Stock Market Volatility: arvy’s 3 Core Principles

Apr 11, 2025 9 min read

Florian

“Know what you own and why you own it.”

– Peter Lynch, investor and author

arvy’s teaser: Bear markets test emotions, not fundamentals. At arvy, we turn volatility into opportunity – with conviction, consistency, and clarity. To unlock the power of long-term investing, let me show you arvy’s 3 core principles.

Bear market.

That’s a polite way of saying “losing a lot of money quickly”.

We’re in one right now. Technically, a bear market begins when equity markets fall 20% or more from their recent highs. This happens on average every 7 years. But here’s the key: over the past 200 years, the market has always recovered. Every time (chart 1: data since 1950). So, in the long run, everything will be fine. But in the short term, it’s tough – emotionally and mentally. That’s why I want to walk you through three key principles we follow at arvy to navigate stock market volatility.

1) Know what you own and why you own it.

2) Lump Sum + Dollar-Cost-Averaging.

3) Bigger Lump Sums.

Chart 1: Bear markets in the S&P 500 since 1950 and subsequent recoveries

Source: Personal Finance Club, S&P 500 log graph since 1950, showing all 15%+ drops

Know what you own and why you own it

Peter Lynch, the legendary investor and former manager of the Fidelity Magellan Fund, famously said: “Know what you own and why you own it.”

At arvy, we live by this principle – and we bring it to life with every company we invest in, like Ferrari:

Know What You Own: Understanding your investments is key. And do not forget you own a part of a business not a stock😉! Ferrari isn’t just a car company – it’s a luxury brand with scarcity at its core. They produce fewer than 14,000 cars a year (about 40 per day), each selling for an average of €359,000. This scarcity supports premium pricing and exceptional profitability: Ferrari runs on a 23% net income margin. Over two-thirds of new buyers already own one. And with the global number of high-net-worth individuals growing by 5% per year, Ferrari’s customer base only gets stronger – no matter the macro backdrop, be it trade wars or recessions.
Why You Own It: We invest in companies like Ferrari because they represent what we call a “Good Story & Good Chart.”
- Good Story: A world-class brand with pricing power, loyal customers, and resilient demand—even in downturns. Ferrari has a high return on invested capital (23%) and sits firmly in the luxury moat. o
- Good Chart: Since its IPO in 2015, Ferrari’s stock has grown 6x, showing strong market trust in its fundamentals and long-term prospects.

We’re not chasing quick wins. We invest in Ferrari and 33 other high-quality businesses because we believe in their ability to deliver steady, compounding returns over the long run. They help us sleep at night – especially during turbulent markets.

At arvy, this philosophy is embedded in our app (chart 2): you can explore every company we invest in, with full transparency and clear explanations. Because when you understand your portfolio, you’re less likely to be shaken by headlines, noise or market swings.

Just because the market is a little noisier, Ferrari will continue to sell all its cars, for which there are years-long waiting lists.

And that brings us to our next principle.

How do we handle volatility?

Chart 2: arvy Investment App; Dashboard, Equity Portfolio, Details to each Position

Source: arvy Investment App

Lump Sum + Dollar-Cost-Averaging

If there is a holy grail of investing, it is this: Start with a lump sum, then keep investing monthly. Simple, powerful – and everyone should know it.

The earlier you start, the better.

Let’s break it down.

It is all about investing a lump sum upfront (say CHF 10,000), then add a fixed amount every month, like 10 – 20% of your net salary. This combo is what we call Lump Sum + Dollar-Cost-Averaging (DCA). It’s one of the most effective long-term investing strategies.

But it all starts with a mindset.

As Warren Buffett said: “Do not save what is left after spending; spend what is left after saving.”

That’s why, on the 25th of each month – right when the salary hits – I send money straight into my arvy account via a standing order. Before paying bills or spending a cent, I pay my future self first.

It doesn’t matter whether markets are booming or crashing. Even in tough times like today, during a bear market, I keep investing the same amount, every month, without interruption.

As Charlie Munger once put it: “The first rule of compounding: Never interrupt it unnecessarily.”

That’s why I stick to consistency come rain or shine. Don’t forget that timing the market comes at a huge cost, especially if you sell your entire portfolio in a panic. Because then you miss the best days.

Missing the market’s best days can drastically reduce your returns, as shown by a Visual Capitalist analysis of the S&P 500 from 2003 to 2022 (chart 3): a $10,000 investment would grow to $64,844 if fully invested, but missing just the 10 best days – seven of which occurred during bear markets like 2008 and 2020 – would slash your portfolio to $29,708, a 54% reduction.

Conclusion: stay invested. And don’t try to sell in a bear market and get in lower. That is a fool’s errand.

Chart 3: The cost of timing the market. Bad timing can take a bite out of returns.

Source: Visual Capitalist

Back to the holy grail of investing. That’s what we show in chart 4: a lump sum of CHF 10’000 and investing CHF 500 per month over time. It adds up.

Want to try it yourself? We also link an investment calculator so you can explore what steady investing could look like for you.

To summarize: trying to time the market rarely works. But investing consistently, regardless of the noise, sets you up for long-term success. It’s simple. It’s smart. It works.

And sometimes – when the market dips – you’ll be ready to take advantage of it.

Which brings us to our final principle.

Chart 4: CHF 10’000 Lump Sum + Dollar Cost Averaging over 30 years, assumption 7% p.a.

Source: arvy, investment calculator

Bigger Lump Sums

This is the final principle.

Every few years, markets drop sharply – by 20 – 30% or more. Take the S&P 500, for example: a drawdown of that size happens roughly every 5 – 7 years.

Like we’re seeing right now.

That’s why, whenever I’ve managed to save up a larger amount, I use these drops as a chance to invest more. Here’s how:

I increase my monthly DCA, say from CHF 500 to CHF 750
Or I invest a larger chunk at once when markets are down 10%, 20%, or 30% from their highs. As an example, chart 5 shows how an additional CHF 5,000 is invested every 10% drop.

The truth is: no one knows what the market will do next. And that’s fine.

Because our edge isn’t prediction – it’s consistency.

At arvy, we stick to the strategy: Know what you own and why you own it. Invest regularly. Use downturns to boost your long-term gains.

We’re here to help you benefit from one of the most powerful tools for wealth creation in history: The financial market. With arvy, you build a portfolio you understand and grow your capital and your financial knowledge along the way.

You invest. You learn. You grow.

Together with arvy.

Chart 5: Lump Sum + Dollar-Cost-Averaging with arvy equity over the last six years