None of us have a crystal ball to predict the future, and that is why it’s important to learn how to effectively deal with uncertainty in our personal lives — and our investment lives. Fortunately, there’s a solution to handling uncertainty in our investment lives which involves diversification, academic research, and financial science.
Given the fact that we don’t know what the future holds (although we expect positive returns), we have to create portfolios that profit from the dimensions of returns: size, value, profitability, and market risk. To put it into perspective, the market went up 500 points because there was no talk of trade wars, but the next day, when Donald Trump tweeted out “We’re going to tax $100 billion worth of Chinese goods,” it moved the market down. When the Chinese president said he was going to reduce tariffs on U.S. imports of autos, the market rose by 400 points.
New news occurs every day which affects securities’ prices. However, over time owning businesses (global stocks) has rewarded investors handsomely.
Cash is the most certain investment asset, and a small amount does belong in most portfolios. However, you are paying a price for that certainty by getting very low returns.
Uncertainty pays more, but you have to learn how to effectively manage that uncertainty, which we can help you with. Contact us today!