While often difficult, investing rules can help us maintain our focus and investment discipline in volatile or uncertain markets. This year, such has certainly been the case with surging interest rates, expectations of a recession, and geopolitical conflicts in two countries. In times like this, it is easy for us to imagine the worst of possible outcomes. However,“I spent a good bit of time discussing the normal distribution of events in the economy.
This is why truly great investors stick to their discipline in good times and bad. Over the long term – sticking to what you know and understand will perform better than continually jumping from theAs any good poker player knows, you are out of the game once you run out of chips. This is why knowing both
Given the uncertain nature of the future, and thus the difficulty of being confident your position is the right one – especially as price moves against you – it’s challenging to be a lonely contrarian.”are extremely difficult things to do without a very strong investment discipline, management protocol, and intestinal fortitude. For most investors, the reality is they are inundated by
It is pleasing to inform clients they made 12% on their account. However, if you inform them that ‘everyone else’ made 14%, you have upset them. As it is constructed now, the financial services industry intentionally upsets people, so they move money around in a frenzy. Money in motion creates fees and commissions.
Most people are in denial about uncertainty. They assume they’re lucky, and that the unpredictable can be reliably forecast. This keeps business brisk for palm readers, psychics, and stockbrokers, but it’s a terrible way to deal with uncertainty. If there are no absolutes, then all decisions become matters of judging the probability of different outcomes, and the costs and benefits of each. Then, on that basis, you can make a good decision.
The reality is that we can’t control outcomes; the most we can do is influence the probability of certain outcomes, which is why the day-to-day management of risks and investing based on probabilities rather than possibilities is important not only to capital preservation but to investment success over time.
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