Predicting the future is a task we’ve all attempted, only to find ourselves disillusioned when reality unfolds differently. Yet, as humans, we’ve developed strategies to cope with the absence of a crystal ball.
- We apply to a list of potential universities and colleges, not just our first choice.
- We interview a series of job candidates, even when there’s a clear front-runner.
- We wear a life jacket on a boat, even though we know how to swim.
In investing, much like in life, the key to maximum peace of mind lies in planning that accommodates a wide range of potential outcomes. This approach allows us to embrace the unknown with a sense of empowerment rather than succumbing to paralysis.
Research consistently indicates that attempting to pick winning stocks often leads to underperformance against benchmarks. However, a successful investment experience doesn’t hinge on predicting winners. Historically, markets have, on average, returned about 10% annually over the past century.
The mantra is clear: rather than attempting to outguess markets, it’s more fruitful to align with them, even if it means enduring short-term disappointments. The odds favour a more positive and fulfilling investment experience in the long run.
So, let’s delve into the wisdom of “Plan, Don’t Predict” as we explore how this philosophy not only resonates in investing but also mirrors the strategies, we employ in navigating the uncertainties of life. Embrace the power of planning for a journey that transcends short-term fluctuations, ensuring a more secure and prosperous future.
“Plan for what can happen, rather than trying to predict what will happen.”—David Booth, Dimensional Fund Advisors