The future is always uncertain.
No one knows for sure what will happen.
But now, a period of rapid technological innovation combined with escalating geopolitics makes it feel like uncertainty is at its peak.
I’m not lying, these environments make me nervous too. Life and financial planning would be so much easier if we all knew what was going to happen in advance.
Unfortunately.
I don’t claim to have it all figured out, but how about a list of 10 things I try to remind myself of during the turbulent times we live in:
1. Certainty is inversely proportional to how right someone will be about the future. John Templeton once wrote: “An investor who has all the answers doesn’t even understand all the questions.”
Now is the time for questions rather than answers.
2. The risk premium exists partly because of uncertainty. Will Mag 7 explode or continue to rise?
Will AI destroy all existing white-collar jobs or lead to Star Trek-level abundance?
Will the bull market continue or will it end suddenly?
Will things get out of control in the Middle East, or will it end soon?
I don’t know the answers to these questions. This is your risk.
3. The biggest risk is rarely the one that everyone plans or talks about. Risk is often what you don’t see coming.
If everyone knows this, the market has probably already priced it in.
4. Strong views that are loosely held. Teams are already being formed around the impact of AI.
I’m the AI team! Oh yeah, I’m anti-AI too!
I prefer to wait to see what the data and evidence show rather than take chances before the results are known.
Keep an open mind. You don’t need to choose a side right now.
5. Be skeptical, not cynical. A healthy dose of skepticism is warranted in times of sudden change. But skepticism is a terrible trait as an investor.
This just makes you believe that nothing is worth investing in.
6. Discipline is more important than optimization. I believe that perfect is the enemy of the good when investing and creating financial plans.
This is also true in times like these.
You don’t need to thread the needle to survive.
7. Focus on what you can control. It’s scary to admit that your hands aren’t on the steering wheel, but the illusion of control doesn’t do you any good.
Paying more attention to the news won’t change what happened.
The late Peter Bernstein once said: “The essence of risk management is to maximize the areas in which we have some control over the outcome, while minimizing the areas in which we have absolutely no control over the outcome and where the connection between the effect and the cause is hidden from us.”
8. Timing the market doesn’t help. The appeal of time increases with every new headline, news alert and anecdote.
Being tempted by market timing doesn’t make navigating times like these any easier.
9. If all else fails, simplify. Einstein said the so-called five levels of intelligence are smart, brilliant, brilliant, genius, and simple.
The more complex the world gets, the harder you have to fight to keep things simple.
The solution to complexity is not more complexity. This is simplicity.
10. Doing nothing is a decision. I don’t plan to make any changes to my investment plan. My conditions have not changed. My risk profile and time horizon are still the same.
So I will continue to contribute to the 401k twice a month when I get paid. I will make my monthly contributions to my IRA, 529 plan, and high-yield savings account. In my brokerage account, you will see that money is added to the account on the 15th of each month.
No portfolio changes. Asset allocation remains the same. The savings rate remains intact.
I don’t do anything when my plan calls for it because that’s how you follow a plan.
Further Reading:
20 Rules of Personal Finance
