Posted by Robert on February 27, 2012
This is a guest post by Robert, who lives in Calgary and
works as a financial advisor retired at 34. He is married, has three kids. Robert and his wife then plan to return to school and become teachers, eventually living and working overseas.
The future is uncertain. You could read that as a platitude, if you like, but I think that it’s common to forget that we don’t really know what’s coming. We make plans and we talk about the future as if we know what will happen. I plan for a vacation, expecting that none of my family will get sick, that the airplane will be safe and that no one will go on strike. I expect the weather to be good and I plan to have a fun and relaxing vacation. But I know that none of those things are certain.
A better example is the stock market. I’m pretty sure nobody invests in the stock market, planning for it to drop in value. As a financial planner, we had to make assumptions about investment returns when we wrote a financial plan. (If you’re interested, we used 5% after inflation for a stock market investment.) We assume that over the long term (10 years or more), the stock market will rise.
There are many risks in life, and especially in investing. A lot could go wrong with my vacation, but I’ll take some insurance and extra cash and worry about it only if it happens. But in the stock market, the risk seems scarier. The market will fall, at some point. Companies will go bankrupt. Market leaders will lose their dominance (think: RIM). Companies occasionally have a negative quarter, which impacts the stock performance. There are a number of things that could go wrong.
But here’s why optimism is a choice. There are a number of things that could go right. Everything could go according to plan. My vacation could be idyllic. The stock market could get a boost from a positive economic outlook or a support monetary stance. A company I own could benefit from a larger-than-expected order, or a helpful government program or a stroke of genius by managers.
So instead of trying to predict what might happen, I choose to be optimistic. I realize there are risks, and I try to minimize them. But once I do, I expect the best. So far, so good. My investments haven’t been without disappointment, but I’ve profited far more than I’ve lost. I’ve taken opportunities, in the markets and also in life (like my vacation), that fear might have caused me to avoid, but that I look back on as both a benefit and a learning experience. And so I am optimistic that 2012 is going to be a great year. I have no proof, nothing concrete I can point to showing that it’s a likely outcome, but I choose to focus on the good things and minimize the bad.
Are you optimistic for this coming year? Do you expect things to turn out well, or do you worry about the things that could go wrong?