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Why is Uncertainty so Hard for Investors?

Updated: Mar 26

Why Is Uncertainty So Hard?  (transcript)

Hey, everyone, it’s Michael here. Did you know that April is financial literacy month? You may or may not see that in the news too often.

But, April is a month where the financial community gets together and celebrates Financial Literacy Month. And in the spirit of that, I wanted to talk to you about a couple of things that I think are relevant to ongoing financial literacy in our country today. Number one, let’s start with uncertainty.

Why do we hate uncertainty so much? Well, for one, we as human beings are wired to crave stability and certainty. And in money, especially with financial markets, we tend not to see either of those things.

Yes, we can look at charts for stock market indexes that can grow over time, and we see a steady trend line upwards. But, day by day, those lines can be very, very jagged, with a lot of volatility. We don’t like volatility at all. Right, we want certainty!

We want to feel stable and comfortable when looking at our investments, which is why investing can be so challenging for so many people. Because today’s age has wired us for instantaneous information, we can log into our accounts, pull them up on apps in our smartphones, and almost instantaneous access to stock quotes, fund quotes, you name it. The information is at our fingertips.

So, not only do we have instantaneous access to information, we also want to form a story or a narrative about what that information actually means. And guess what, there is an entire industry dedicated to helping you do just that. For instance, today is APR 12. I’m recording this on APR 12th, 2022.

The latest CPI inflation numbers have just come out. Already, every major financial site and social media site that I see has some type of article written about CPI (inflation). These articles could not have possibly been written after 8:30am this morning.

No, these articles were already written. All they needed was to know exactly what that inflation number was going to be. Put it in, hit submit, and the narrative is right in front of you about how hot inflation is becoming.

And they want you to constantly be checking back for more updates.

We find ourselves in this cycle of the constant need to feed our desire for certainty by going back over and repeatedly to our preferred sources to help us hopefully find a small smidge of comfort or certainty that we can cling to. That’s not going to happen.

If you want to know what certainty pays, you can log into your bank account, check out whatever interest rate they’re paying you in your savings or your checking account. That is what certainty pays, which is why long-term investors can expect to earn a higher rate of return than people who are putting their money in cash in savings and checking accounts.

Because there is an uncertain degree to the future, especially in the short run. Now, the situation gets a lot more clear as we go for the long run, which is why we always coach investors to be thinking about the long run.

Not today. Not tomorrow. That’s not the long run. The long run we think in decades, not in days.

So, make sure that you’re thinking about that when you allocate your assets. Do this appropriately so that you can sleep at night. The next thing I want to talk about is the fact that it’s Financial Literacy Month. We talked about this on the podcast.

But recently, the state of Florida passed a bill into law, where high schoolers are now going to have to have some core financial literacy teaching before they can graduate. And I cannot stress this enough for parents of small children, parents of middle schoolers, parents of teenagers–talk to your kids about money. Don’t make them share your financial burdens, but talk to them about money.

Ask them questions. Get them to share what their thoughts are about money and how they think things work. Create a dialogue with them because the majority of what people pick up about money and finance (especially their subconscious beliefs about money and their money habits), the lens that they look through when they think about financial matters, so much of that is caught, not taught.

And what I mean by that is when they’re watching you, because we know as parents, kids watch us, right? So, we know that kids want to learn from mom and dad or learn from the whoever is raising them in the home. The environment that they grew up in is where they’re going to learn a lot of their beliefs and thoughts about money. So don’t hide from that.

Have a conversation, share with them about things that they may have questions about. You may never know what’s going on in the sight inside of your kid’s mind unless you unless you ask. One of the things that I tell parents is, especially when it comes to young adults and teenagers, we want them we want them to learn about money and make some mistakes.

When would you rather have your children make mistakes with money? Early, when you can be there to help maybe brace the impact or make it a teachable moment, or later on, when they’ve made some really colossal blunders that saddled them with college debt or ruined their credit score?

Let’s get to the habits that we need to be forming and the teachable moments early in life where you can be there to help them learn and possibly avoid significant mistakes down the line. That begins with financial literacy. And in my view, financial literacy begins in the home.

The last thing we’re going to pivot again, back to uncertainty. There’s a great, great verse in Proverbs in the Bible. And if you don’t read the Bible, that’s okay. The Bible is still wonderful and good for teaching. The book of Proverbs is full of wisdom. And that verse is Proverbs 27:1—

  “Do not boast about tomorrow, for you cannot know what a day may bring.” And what that speaks to is the uncertainty of life. Right?

Because, yes, we want to be planning for tomorrow. We want to be good financial stewards, to be thinking about how we can support our families, and to succeed and thrive in our career goals. All those things are important, but let’s not forget how uncertain life can be.

And what I mean by that is don’t forget to think about and meditate on gratitude. One of the things that happened to me just this morning was my wife told me I was a little grumpy. I didn’t sleep well last night. And my wife looked at me and said, “Well, you woke up today, you have another day.”

And she’s so absolutely right. You know, I should be thankful. Every day is a new opportunity to go about, you know, hanging out with my family, enjoying this life and all the blessings that we have.

So don’t forget gratitude. Gratitude is so important. So yes, we live in a time right now where there’s a ton of uncertainty. But don’t forget to count your blessings. Don’t forget gratitude. We can make our plans. We’ll work our plans and stay diligent on that course. But don’t forget to be thankful for all the blessings that you have as well. Talk to you next time.


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