Three Steps to Deal with Uncertainty
By Paul Hynes, CFP®
Uncertainty is a part of life. Dealing with it thoughtfully can offer hope for a better life. Here are three simple strategies that can help during uncertain times.
Everything about this pandemic reminds us that humans are not clairvoyant. We can’t predict the future. That’s why the first strategy is to develop a long-term plan that you can stick with. The plan is designed to help you pursue your goals. Those goals can be about life, relationships, and more. While this discussion is about investment strategies, we recognize that money is simply a tool to help you live the life you want.
Have a plan that helps get you through the tough times, so you can benefit from the good times. In the case of investing, the key is to choose a path with the level of risk that you can tolerate.
How do you know how much risk you can tolerate? You know yourself best. Does a rocky market keep you up at night, or can you shrug it off because you know you are in it for the long haul? If you desire less risk, you’ll need to save more, extend the time horizon, cut back on some of your goals, or a combination of all three. Once you are confident that a workable plan is in place, it’s easier to stay the course through both good times and bad.
Second, control what you can control, and let go of everything else. You can’t control the investment markets. Returns on investment are inherently unpredictable. However, you can control how much you save and how you deploy those savings into your investment plan. Make that your focus. Try to ignore the news of the daily markets going up, down or sideways.
Third, judge yourself by the quality of your decisions based on the information you had at the time. Things outside of our control can affect us and the results we achieve. What matters is how we respond and the choices we make going forward. The future is always uncertain. Yet, you can make quality decisions today despite being unsure about tomorrow. Be satisfied knowing that you did the best you could.
Even though many people instinctively fear it, uncertainty can create opportunity. If there were no uncertainty, there wouldn’t be an expected premium on the relative returns from investing in risky assets, such as stocks. Dealing with uncertainty in a thoughtful way as outlined above can help us work toward a better future.
If you’re uncertain about how you should deal with uncertainty, talk with us. We’re here to help.