There’s an old saying: Nothing is certain except death and taxes. But in today’s rapidly changing, global, hyper-connected world, uncertainty has joined the ranks of things we can expect. Markets move, politics surprise, and wildly innovative technology debuts seemingly every day, yet most investors believe they can correctly forecast the unknowable. Some (the financial media) are paid to play this guessing game, but most investors try to predict as a default of human nature. Participating in a system like financial markets leads many to believe they can beat said system. But this thinking error leads many astray, especially when they forget something essential: Their financial plan already accounts for the unpredictable.

Think back to 2008. Few predicted Lehman Brothers collapsing or the housing bubble bursting so quickly. Investors who believed home prices always rose, or that credit markets were safe, suddenly faced the unthinkable. More recently, the COVID-19 pandemic taught us that a virus across the world can reroute economies, stop travel, and rewire supply chains against all models. Add today’s geopolitical tensions, inflation spikes, rapid innovation, AI, energy transitions, demographic shifts … just naming them feels overwhelming.

Each unexpected change blindsided many investors. Yet a pattern appeared: Each crisis highlighted ever-apparent uncertainty. And in most cases, those who did not react emerged well ahead.

Remember that as investors, we are constantly on the precipice of uncertainty. We can never confidently know how anything will play out. No one can. So what should we do? Probably nothing, which is sometimes the hardest thing to do. With everything changing, we think we should be adapting. New circumstances require portfolio changes, right?

Take a step back for a moment and recognize your behavior. You are reacting. Reacting is a form of self-doubt. Remember, doubt gives the financial services industry ammunition to sell its products, as they are motivated to spotlight any friction and scare you into “just doing something.” And many unchecked reactions can wreck a portfolio.

How can long-term investors make rational decisions while reacting to short-term data? You can’t know exactly what will happen tomorrow, yet you can know that some degree of unexpected — even shocking — change is inevitable. That’s the certainty of uncertainty.

When faced with such uncertainty, I like to remember what we know.

We know that creating a plan and sticking to it works. If your goals are long-term, your plan should mirror that. You don’t invest money for today or tomorrow. You invest for 5, 10, 25, or 50 years later. How will an event impact your future? You can’t know for certain, but look back on history and remember (or imagine) how it felt to live through some of the aforementioned scenarios. Uncertainties come and go, but over a sufficient time horizon, markets have always been positive. All that really matters is that you have income when you need it and don’t overspend your earnings (income).

We also know that, historically, certain asset classes, such as ownership of businesses in the form of stock, provide superior long-term rates of return. But we know this benefit doesn’t come without short-term fluctuations. At any time, markets can pull back between 10–15%, and they typically do so at least once every 12 months. This is “normal” and should be viewed with joy rather than fear. We know this happens; we just can’t know “when.” Instead of inspiring fear, train yourself to recognize this as an opportunity.

When things go on sale, I like to buy, not run out of the store in terror. This approach takes courage and repetition. Long-term investors with a well-designed plan look at those market declines as opportunities, allowing them to acquire ownership from short-term traders at discount prices. On which side of that deal would you rather be?

To navigate this uncertainty long-term, we encourage all investors to set goals, make a plan, and save until it hurts. How much money you keep has a far more significant impact on your success than any investment return you may earn. Put time and the power of compounding to work for you. Stay focused on that strategy. Sometimes the best thing to do is nothing. In short:

• Successful investing is often goal-focused and planning-driven. Failed investing is typically market-focused and current-event-driven.
• Successful investors stick with their plan over their lifetimes, making rare and subtle changes when circumstances warrant. Failed investors react continually to random economic and market developments.

Today’s uncertainty is large, perhaps larger in perception than in many past eras because of the faster pace of change, more immediate information, and increasingly viral messaging. But we’ve walked similar paths before and survived (even prospered!) when we didn’t try to outrun fear or chase greed. When we accept that uncertainty is the only certainty, and then choose to stick with our plan, we model great investment behavior.

Have a plan that survives the unknown, live within your risk tolerance, stay diversified, be willing to endure short-term discomfort for long-term objectives, and do nothing when nothing needs to be done. That’s not passive; that’s discipline. That’s the investor’s power in a world where we can certainly expect a visit from this invisible friend we all share: uncertainty itself.

Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.

About the author

Steve Booren is the Owner and Founder of Prosperion Financial Advisors, located in Greenwood Village, Colo. He is the author of “Blind Spots: The Mental Mistakes Investors Make” and “Intelligent Investing: Your Guide to a Growing Retirement Income” and a regular media columnist. He was recently named a Barron’s Top Financial Advisor and recognized as a Forbes Top Wealth Advisor in Colorado.