Investments, uncertainty and learning to love the word maybe
In late January 2023 a non-league football team comprised of plumbers and teachers from the Ayrshire town of Darvel took to the pitch for a Scottish Cup tie. The game ahead was against Aberdeen, a top-tier team five divisions and 62 league places above.
No one predicted Darvel FC would win. No one saw it coming. The probabilities and betting odds all foresaw a comfortable Aberdeen victory.
But that’s the thing about the future. It’s unpredictable. It’s unknowable.
Most of us would love to see ahead into tomorrow, next week or next year but it doesn’t work like that. Somethings are likely, some unlikely and maybe is always possible …
No such thing as a sure thing
Uncertainty is a big factor when making investment and money decisions. We all want to make the right call, but we can’t know that we will. By definition nothing’s ever certain.
We don’t really know how the economy will perform. We don’t really know how a particular stock will do. We don’t really know what the next big trend will be.
We can research, sure. We can guess. We could summon all the world’s top mathemagicians and economists to help us crunch the probabilities but even then, there’s no such thing as a sure thing …
Ask the Aberdeen fans.
Caution versus risk
Uncertainty can lead to investment decisions that are less than optimal. Some people, for example, avoid it altogether for fear of losing money, while others invest so cautiously they short their financial goals.
Some take on too much risk in the hope of a big payday, while others go all in on a “sure thing” … only to watch in horror as it flops.
The first lesson in investing is that it’s uncertain. It just is. However uncomfortable you find the notion, uncertainty may be the only certainty there is.
The second lesson is focusing not on what you can’t know, but what you can. You can learn about this company, product, asset or investment fund. You can size-up the impact of all potential outcomes. And you can get a realistic understanding of the risks involved.
Tips for more-informed investment decisions
1. Do your research
Before making any investment or financial decision, take time and gather as much information as you can. This might include reading up on the latest trends, consulting with financial experts, and looking at historical performance data.
2. Consider all outcomes
Think of all the possible outcomes that could result from this decision and weigh up what each would mean for you. This’ll help you assess if the rewards are worth the risk, and it’ll help you prepare mentally for what’s ahead.
3. Diversify
By diversifying your investments across different asset classes you can reduce your overall risk and increase your chances of success. “Put all your eggs in one basket” said no decent investment manager, ever.
4. Be realistic
Be rational and realistic when setting your financial goals and assessing the risks involved. Try to be objective. Don’t get sucked in by hype or hope. Don’t expect to get rich quick and do expect your share of ups and downs along the way.
Set mindset to maybe
The tips in the section above aren’t revolutionary. They’re fairly standard guides and recommendations ahead of any investment decision. But mindset, too, is so important … not just in investing but living comfortably in a world of maybe.
Here’s a few tips to help you do that:
1. Embrace the unknown
Instead of fearing uncertainty, try to embrace it. Focus on the opportunities that live in uncertainty. If uncertainty is a constant then its opportunities surely are too.
2. Practice mindfulness
Mindfulness techniques can help ground you in the present and reduce anxieties about the future. There are two days you can do little about – yesterday and tomorrow.
3. Make all risks calculated risks
Risk ÷ information = calculated risk. Get into the habit of researching your risks to infuse your decisions with more ownership and confidence … and ultimately more comfort.
4. Keep learning
The more you know about a particular subject, the more comfortable you’ll be making decisions about it. So keep learning, seek expert advice, and never fear asking questions.
5. Learn to love maybe
Some things are certain and some things unlikely. Very few things are impossible. It’s important to remember that “maybe” is often a more realistic answer than “yes” or “no”.