So many things I don't know.

During the onboarding process with a new client, there are a few things I make clear.  One of those things is that during the coming decades, I will say, at least once (and probably many times) the words 'I don't know'.  I will always do everything I can to answer a question to which there is an answer.  However, much of the time I am asked to know the answers to things that are impossible to know.  Where will the market be this time next year?  Would I be better keeping my money in dollars or transferring into sterling?  When will interest rates go up?   The problem is that there are too many people out there professing to know the answers to things that are totally uncertain.  As Tony Isloa writes in this wonderful piece, "people need to be more certain of uncertainty".  The future is uncertain, our future is uncertain.   But that has always been the case.  We have never had certainty in our lives, in our country, or in the world.  As I always say, 'we can't be certain that the sun will come up tomorrow, or that we will be around to see it', (although we can, based on probability, guess that it will happen).

As Tony writes, there is another problem.  And that is that we are not taught how to deal with uncertainty.  From Gerd Gigenzer, the author of the book Risk Savvy:

We teach our children the mathematics of certainty — geometry and trigonometry— but not the mathematics of uncertainty, statistical thinking. And we teach our children biology but not the psychology that shapes their fears and desires. Even experts, shockingly, are not trained how to communicate risks to the public in an understandable way.


This is so true.  Every day I try and educate people around the misconceptions of risk in investing in companies (equities, stocks, shares - same thing).  The misconception takes two forms.  Number 1; people massively overestimate the risk of investing in companies.  And number 2; people massively underestimate the risk of not investing in companies.  Read those two things again.  They are not the same.

Owning the great companies of the world has never, EVER, resulted in you losing your money if you have remained invested.  Zero risk over the long-term.  However, without investing in the great companies of the world, you risk having your money ravaged by inflation.  And that is the thing you need to worry about - inflation.  It's the biggest risk to each and every one of you, whoever you are, and however much money you have.  That is certain.

No one teaches us that though, do they.

As a Financial Planner and Investment Advisor, I have a large amount of humility.  I am very aware of the things that I don't know, that there are things I could never know, and that many things are uncertain.  When it comes to planning and investing, there is nothing more dangerous than a long bull (up) market for making people think that they know everything.

As Ben Carlson writes 'don't confuse a bull market for increased brain power'.