As investors, we've all been there, staring at our portfolios during a market downturn, heart racing as red numbers dominate the screen. Recall in Feb/March 2025, when the stock market crashed amid new tariff policies introduced by President Trump. The S&P 500 plummeted, global indices followed suit, and the VIX—the "fear gauge"—surged past 60, marking one of its highest spikes in history.

It was a moment of pure panic: headlines screamed recession fears, social media buzzed with doomsday predictions, and even seasoned traders felt the chill. That fear, a knot in the stomach, reminding us of our vulnerability in the face of uncertainty.

But here's the thing: that fear is not your enemy—it's your signal. In investing, emotions like fear can cloud judgment, leading many to sell at the bottom and miss the recovery. It is completely normal to experience that fear, questioning yourself if you should continue investing as volatility spiked. Yet, on hindsight, those who held on, or even bought more, were rewarded as the SP500 had risen approximately 35% from the April lows.

This is exactly what separates average investors from those who are build lasting wealth. It's a reminder to lean into Warren Buffett's timeless advice: "Be fearful when others are greedy, and greedy when others are fearful."

The VIX measures market volatility based on S&P 500 options pricing, essentially quantifying investor anxiety. When it spikes, as it did dramatically in April 2025 and more recently in October amid renewed tariff threats—jumping to over 21—it's a sign that fear is gripping the market. Indices sell off, portfolios shrink, and the instinct is to run for the exits.

Take a moment to ‘embrace’ that experience, seeing your holdings in the red, fighting the urge to liquidate. That sinking feeling is universal, but it's also temporary. History shows that VIX spikes often signal market bottoms. For instance, after hitting extreme levels above 40, the S&P 500 has historically risen about 30% a year later on average.

Buffett's mantra isn't just a quote—it's a strategy rooted in behavioural finance. When fear dominates, asset prices drop below their intrinsic value, creating buying opportunities for those with the courage to act. In the 2025 turmoil, while many panicked and sold, contrarian investors scooped up undervalued stocks in sectors like tech and industrials, positioning themselves for the eventual rebound.

Investing isn't about timing the market perfectly; it's about time in the market. The risks of buying during fear-driven selloffs are real—further declines are possible—but the rewards compound over years.

Think long-term: Compound interest and dividend reinvestment turn temporary dips into wealth-building moments. All market sell-off events, painful as they were, will likely be another chapter in the market's upward trajectory, if you are buying the right assets. As Charlie Munger says, cheap junk is still junk.

Fear in investing is inevitable, but how you respond defines your success. The next time the VIX spikes and indices tumble, remember that feeling you had experienced, then embrace it, act in a contrarian manner and trust the process.

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