{"id":59766,"date":"2022-02-05T05:59:09","date_gmt":"2022-02-05T09:59:09","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=59766"},"modified":"2022-02-18T12:09:16","modified_gmt":"2022-02-18T16:09:16","slug":"investment-uncertainty","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/investment-uncertainty\/","title":{"rendered":"Don’t Let Investment Uncertainty Hold You Back"},"content":{"rendered":"\n

Does fear of uncertainty<\/a> hold you back from investing? Are you nervous about putting your money in a long-term investment account, not knowing how much it will grow?<\/p>\n\n\n\n

According to Morgan Housel, the author of The Psychology of Money, <\/em>investment uncertainty holds many people back. However, the longer you put off investing due to fear, the smaller your returns will be.<\/p>\n\n\n\n

Here’s why accepting uncertainty is key to achieving long-term investing success.<\/p>\n\n\n\n\n\n\n\n

Don\u2019t Be Put Off by Uncertainty <\/strong><\/h2>\n\n\n\n

In The Psychology of Money, <\/em>Morgan Housel shares one key to reacting well to bad news: embrace<\/strong> investment uncertainty.<\/strong> He argues that in order to achieve long-term investing success, you must accept that you\u2019ll feel uncertainty as the market fluctuates. Otherwise, you won\u2019t be able to endure the uncertainty long enough to let your returns compound. <\/p>\n\n\n\n

Housel explains that investing inherently includes some measure of uncertainty\u2014and the higher the potential gain, the more uncertainty you feel. For example, the longer you let your stocks compound, the more money you can gain, but the longer you have to feel the uncertainty of not knowing exactly what will happen to your money. Conversely, if you hold low-value bonds, you won\u2019t accrue much value\u2014but since bonds are far less volatile than stocks, you won\u2019t feel much uncertainty, either. <\/p>\n\n\n\n

(Shortform note: Housel assumes that this uncertainty or discomfort is inevitable when investing\u2014and while some discomfort may be normal, constant discomfort is not. Several experts recommend strategies to decrease the anxiety you feel around your investments<\/a>, like checking them once a quarter at most.)<\/p>\n\n\n\n

According to Housel, most people try to limit the uncertainty they experience by timing the market\u2014but since timing the market is impossible, they end up losing money. As an example, Housel points to the fact that tactical mutual funds, which bounce between stocks and bonds in an attempt to strategically avoid market risk, generally do worse than more traditional stock-bond funds that stick to steady investments regardless of market fluctuations. In other words, nobody can successfully time the market\u2014not even professionals. <\/p>\n\n\n\n

(Shortform note: Ironically, in The Intelligent Investor<\/em><\/a>, Graham <\/em>suggests that some people time the market not due to fear of uncertainty but due to overconfidence<\/a>: They have an arrogant presumption that if you\u2019re smart enough, you can predict how the market will move.)<\/p>\n\n\n\n

Therefore, Housel recommends, instead of trying to avoid uncertainty, accept that uncertainty is inevitable when investing. Remind yourself that you\u2019re trading your short-term peace of mind for potential long-term investing success, and use that knowledge to endure the market long enough to let your returns compound.  (Shortform note: In his book, Housel focuses exclusively on the toll that investing in the stock market<\/em> takes on your peace of mind. But in the blog post he based the book on, Housel discusses other financial areas as well, arguing that every <\/em>financial reward you achieve takes a toll on some <\/em>aspect of your life, and you can only achieve the reward if you accept each of those tolls<\/a>. For example, you may patent an invention that earns you millions\u2014but you can only develop that invention by accepting the toll working on it takes on your social life.)<\/p>\n","protected":false},"excerpt":{"rendered":"

Does fear of uncertainty hold you back from investing? Are you nervous about putting your money in a long-term investment account, not knowing how much it will grow? According to Morgan Housel, the author of The Psychology of Money, investment uncertainty holds many people back. However, the longer you put off investing due to fear, the smaller your returns will be. Here’s why accepting uncertainty is key to achieving long-term investing success.<\/p>\n","protected":false},"author":8,"featured_media":60174,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[31,42],"tags":[577],"class_list":["post-59766","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-money","category-motivation","tag-the-psychology-of-money","","tg-column-two"],"yoast_head":"\nDon't Let Investment Uncertainty Hold You Back - Shortform Books<\/title>\n<meta name=\"description\" content=\"Investing inherently includes some measure of uncertainty. 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