The brain is wired to crave certainty, needing clear information to make effective decisions. Ambiguity makes us uneasy, often leading to the sentiment, "I don't care if the news is good or bad, just tell me what it is. Not knowing is the worst."
Probability and Decision-Making
In reality, uncertainty is constant, and we must rely on
probabilities to guide our decisions. This involves complex statistical
thinking, which many of us find challenging. As a result, we tend to
oversimplify probabilities.
The Allure of Certainty
In the financial world, we seek clarity amid uncertainty. We
gravitate towards market forecasters and experts who confidently predict future
trends, often mistaking their confidence for accuracy. However, popularity and
confidence do not equate to predictive success.
At one of the large firms, I worked for previously, this is what they
tried to have us do. We were told, “Say
it with confidence and they’ll believe you, even if you’re unsure!” This was for sure an integrity conflict for
me.
Investing Insight
Surprises and uncertainties are inevitable in financial
markets. We cannot control the markets or the economy, nor can we depend on
expert forecasts, regardless of how certain they appear. Even forecasts with
clear probabilities are not guarantees—unexpected outcomes can and do happen.
The Power of a Financial Plan
What we can control is our response to market fluctuations.
A solid Financial Plan provides structure, but it must be paired with a
Response Plan to navigate uncertainties. This is where I come in. Let's focus
our efforts on what we can manage—our personal financial strategy and response
plan.
Investment
advice offered through OneAscent Financial Services, LLC, d/b/a Provident Oak
Financial, LLC, a Registered Investment Adviser with the United States
Securities and Exchange Commission. Registration as an investment adviser does
not imply any certain degree of skill or training.
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