When you wake up and dress up to go out for the day’s toil, you often do so with the expectation that things will work out well for you and that you will return safely home. But what if the day doesn’t go as planned?
When you embark on a project with a clear plan on how to move from point A to point B and then point Z, you expect that at a point the project will be completed. And often they tend to be completed albeit with unforeseen challenges showing up at intervals.
Like it is with going out to go about your daily work, and with embarking on a project, so it is with investing.
When we invest, there’s only one expectation that one can have, a great return on investment (ROI). Why would you have a different expectation? Yes, great ROI is a worthy expectation since you are not in the business of charity. You are in the business of making your money work for you.
However, having the right expectation about the unknown future requires us to balance our optimism with a dose of reality. What does this mean?
One, day-to-day when you set out for work, you encounter different challenges often more than you anticipated. But you don’t get to end that day just because of one of two challenges. Never! Often, you push through the day despite the challenges, hoping you get it solved and then move on. It is similar to what’s obtainable in the world of investing. You might have expected a great ROI but the path to huge ROI won’t be smooth. It will be filled with ups and downs, negative returns, and positive returns. And that’s perfectly normal. It’s the natural order of things. Don’t then liquidate your investment because of one negative return day/week/month just as you wouldn’t end your day/week/month because of an unexpected challenge.
Also, similar to when you embark on a project, beyond the challenges that you might have anticipated, new ones will show up as well. Two things here:
- One, you won’t because of such a challenge just call it quit on the project. No! Rather, you try to solve it. Similarly in investing, it might be that you have invested in what your risk appetite can’t handle. In which case, the reasonable thing to do is not to stop investing all together but to find other assets with a lower risk profile. Don’t ever deprive yourself of potential upside just because of a bad day or choice.
- Two, at other times, you may end the project because you realize there’s no way this project succeeds under the prevailing circumstances. That’s also understandable and it often happens while investing as well. Especially when you have invested an amount of money that you should never have invested. When you do such, you have not done your fundamental assessment right and investment endeavors like that often fail.
You see, all investments are an optimistic bet about the future. A bet that the asset you invested in will keep doing better, a bet that the business will keep growing, and a bet that the economy will keep getting better. Hence, you will get a great ROI. If history has shown us anything, it is the fact that making such bets are worthy and often highly rewarding.
Yet, what we can also learn from history is that the path to this optimistic view of the future will never be straight. It will be laden with a lot of ups and downs, good weeks and bad days, right calls, and bad calls among others. However, what you are optimizing for is that overall you are more right than wrong. And it is futile to optimize for being right all the time.
So as you invest, take bets, and plan for the future, remember to always mix with your optimism a dose of reality. As it is obtainable in the world of our everyday life, so it is in the world of investing. It’s never a straight line up, it’s always a zigzag for every one of us in every endeavor. Embrace it in your investment journey as well.