Your investing experience can be pleasant or unpleasant. The reason for the difference involves your expectations, your advisors, your thinking style and how reality works.
Many people hold wishful ideas about reality. It happens in science, too.
Over the years physics has evolved from deterministic to probabilistic. Newtonian physics to quantum physics.
If you are a Newtonian type person, then you tend to see the future as deterministic. If you could know the position and momentum of each particle in the universe and the laws that apply to them, you could predict the future with certainty. In the investment field, this mindset leads you to believe the future of your investments can be known if you know enough about the present. If there are things you don’t know, your advisors do or should.
Not going to happen. Physicist Mark Alford describes it like this:
In ordinary life, and in science up until the advent of quantum mechanics, all the uncertainty that we encounter is presumed to be uncertainty arising from ignorance.
Presuming that uncertainty arises from ignorance will lead you to places you will not enjoy. Some of the uncertainty truly arises from what we don’t know, but at least some of it is from what we can’t know.
Quantum physics and life are merely probabilistic. Determinism does not exist.
The approach becomes statistical or probability based. The balance of probability is quite good enough for many decisions so long as you monitor them and adjust as necessary.
If you save money relentlessly you will accumulate more wealth than someone who does not save at all. There is no guarantee that you will achieve what you want, or even have more than the spendthrift, but there is the tendency for it happen.
Good planning involves connecting to processes that have tended to work.
In this sort of world, outcomes evolve based on how well you understood the process, how quickly you adjust as you find variances in the world and in yourself, and lastly how much help you can get to keep you from the paths of improbable success.
There is no certainty in quantum physics and yet lasers work reliably. There is no certainty in life, but most people end up in a good place. Plans and processes must be based on what will likely work and with a view to curing the aberrations as early as possible. The 3 Rs of planning matter. Use the record, review, revise process.
Daniel Kahneman of Behavioural Economics fame has this to say,
“We are prone to overestimate how much we understand about the world and to underestimate the role of chance in events.”
Don’t expect more from a system than it possesses. People who think they, or anyone else, can remove the uncertainty of investing are in for a hard time. People who stay within a range of possible outcomes will be less disturbed by variations and will likely reach their goal.
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