Albert Einstein had a comment on mathematics a hundred or so years ago. It applies to investing too.
So far as the laws of mathematics refer to reality, they are not certain. And so far as they are certain, they do not refer to reality.
Investment management is faced with similar problems. There are no certainties. There is history and experience and reasonable expectation. There is at best just a probability of success.
In physics, there are fewer opportunities. With financial planning and investments, you get the ability to notice how your plan connects to reality and adjust it as you learn more or as the world evolves. The requirement is that you pay attention, review the meaning of what you have seen and adjust your course.
In physics, you just have probabilistic answers. The laws remain the same and the description may become somewhat more nuanced, but not certain.
When someone tries to sell you the value of a fund based on its Alpha, Beta or Sharp value, you should recall the rule.
So far as the laws of investment management refer to reality, they are not certain. And so far as they are certain, they do not refer to reality.
No one is certain about the future. People are most likely to succeed when they recognize how the world behaves and arrange to have a specialist help them travel through the maze. Seek help, it is one of your best investments.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. firstname.lastname@example.org 866-285-7772