Volatility.

Volatility describes the degree an investment's value varies over time. Volatile investments sometime have wild swings higher and lower, unlike a savings account.  The reason to put up with this volatility is that these investments also return a 'risk premium' above the low but secure return available on volatile 'risk-free' investments like a savings account.

The time component inherent in long-term investing is perfectly suited to moderate the effects of volatility and leave the investor enjoying the fruits of the risk premium without volatility negatively impacting the investment. To explain, let's use the analogy of a vehicle road trip.  

This is a single-day car road trip where you wake early and leave before dawn. You've packed snacks, water, and your smartphone GPS tell you exactly which roads to follow. The gas tank is full, so you won't need to stop.  Just leaving town you see a beautiful sunrise. Just after sunrise, a morning shower. By noon it's baking hot. Early afternoon brings a thunderous deluge with lightning and sheets of rain. By mid-afternoon, you arrive at your destination.  The sun is shining.  You gladly step out of the car, where you've been shielded from the earlier rains and baking temps.

The road trip represents your long-term investing journey, and the varying weather on the way represents the volatile ups and downs of your investment.  Heavy rains are market downturns.  Sunshine represents market recoveries.

Watching all that weather through the windshield, you remain tranquil inside the climate-controlled car because you never stop to get out of the car and get wet (or hot, or cold, etc).  In the same way, the long-term investor watches all that market volatility comfortable in the knowledge that it doesn't affect her.  She's driving steadily through the rain - maybe with some white knuckles on the steering wheel - but still insulated from all the madness around her.  

Because she doesn't exit the car during the rainstorm, she doesn't get wet.  She sees the rain soaking some folks outside her car but, so long as she stays in the car, she doesn't get a drop of water on her.  In this way, she sees the rain but doesn't realize the rain.  She doesn't actually get wet.  The investors who sell during these market slumps are essentially leaving the interior of their dry car to stand in the rain because, when they sell because of a slumping market, they are realizing their losses.  They get wet. 

Can you imagine her pulling over to stand in the rain when she could simply drive through it and find dry weather up the road? Why then should one sell properly selected long-term investments at a loss when the market slumps instead of simply holding them until they recover? The investors 'white knuckles on the steering wheel' are the emotions that creep up during a down market. Emotions urge investors to sell because their balance is shrinking. It's best to fight those emotions and drive on rather than pull over, stand in the rain, and get wet.

The time element of long-term investing is what allows you to watch that weather from inside the car.  A short-term investor has little choice - he has to get out of the car.  If it's raining, he gets wet.  A long-term investor simply drives on and, because prices are lower during market slumps, he can actually by those same investments on sale.

So, like the long road trip allows our traveler to drive on through squalls, time allows our investor to stay the course through all the market volatility and reap the 'risk premium' inherent in volatile investments.