Can you handle big share price falls?

There have been some big reactions to several reports so far this month.

Altium Limited (ASX: ALU), a2 Milk Company Ltd (ASX: A2M) and Appen Ltd (ASX: APX), among others, have all seen huge surges in their share prices in response to their profit results. That’s great if you’re a shareholder.

However, it’s not so good if you’re a shareholder of a business that sees its share price plummet.

BWX Limited (ASX: BWX) fell by 31.4% today.

WiseTech Global Ltd (ASX: WTC) plunged by 23%.

Domino’s Pizza Enterprises Ltd (ASX: DMP) is down 14% over the past week.

And so on.

You would need a crystal ball to only pick big winners and avoid shares that suffer big drops. It takes patience and perhaps bravery to hold onto a share when it falls by more than 10% in a single day. That’s part of the game of investing in individual shares.

All six businesses that I’ve mentioned in this article so far have big plans to grow their revenue and profit over the long-term, yet the market had expectations for each which were exceeded or not reached but it reacted differently to each one.

Your winners will balance out the losers, hopefully you have bigger winners than losers. Maybe BWX and WiseTech will bounce back over the next 12 months and beat expectations again.

If you can’t handle this type of volatility then I think it’s important to still stick with shares. Just go with something that is diverse but has a long-term growth future.

Exchange-traded funds like Vanguard MSCI Index International Shares ETF (ASX: VGS), BETANASDAQ ETF UNITS (ASX: NDQ) and Betashares Global Cybersecurity ETF (ASX: HACK) all come to mind as good options.

Foolish takeaway

Volatility is the price of long-term returns. There is no guarantee that the best businesses in the world won’t be volatile. Just look at the previous price movements of Amazon, Apple and CSL Limited (ASX: CSL) since inception, there have been years where the prices have dropped by a significant amount. It would have been silly to sell any of them up until this point.

I think these top stocks are great examples of shares to own, no matter what the share price does in the short-term.

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Motley Fool contributor Tristan Harrison owns shares of Altium and BWX Limited. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS and BWX Limited. The Motley Fool Australia owns shares of A2 Milk, Altium, Appen Ltd, BETA CYBER ETF UNITS, and WiseTech Global. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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