Uncertainty Is Underrated
“A wave of new scientifc discoveries reveals that learning to lean into uncertainty in times of rapid change is a promising antidote to mental distress.” –Maggie Jackson, New York Times. For many people, uncertainty is something to avoid or at least mitigate. But what about the positive things that uncertainty can bring? Without it, there would be no surprises, no joy in watching sports, and no 10% average annualized return on the stock market over the past century.
Let me explain that last one: If there was no uncertainty, returns would be predictable and there would be no difference between putting your money in a savings account or investing it in the stock market. We’ve all lived through years like 2022 when the market went down a lot and years like 2023 when it went up a lot. The potential risk makes possible the potential reward. So thank goodness for uncertainty.
People often talk more about the downside to uncertainty than its upside. There’s even a term—loss aversion—that refects how a loss can feel more painful than a gain of an equal amount. Maybe that’s why uncertainty is underrated.
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Robert J. Pyle, CFP®, CFA, AEP® founded Diversified Asset Management, Inc., in 1996 to provide personalized, comprehensive wealth management services to successful individuals, families, single women, and business owners. His specialty is addressing the complex financial needs of self-employed professionals, corporate executives, and small-business owners. Our disclosure can be found here. The views, opinion, information, and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting, or tax advice.