There is an age old saying that there are only two certainties in life, one is taxes, the other is death.
It is no wonder that being uncertain about what future will brings is a natural condition for humanity. In life, as in investing, accepting uncertainty and growing beyond it is something we all need to do. If it weren’t, no child would walk, no one would learn to drive, and there will be no businesses providing goods and services essential to our survival, needs and wants.
There are two techniques that successful investors employed successfully throughout the ages to deal with uncertainty. First is considering the worst case scenario. Second is the certainty in uncertainty.
No man is God, not even Warren Buffet and George Soros, they don’t have crystal balls as much as you and me. But they do know what is the worst case scenarios of each investment they under took. That is also the certainty in uncertainty of investment universe.
For instance, in purchasing of properties and necessary insurances to cover them, the worst thing that can happen is that their values will drop to a certain amount but never to zero, unlike stocks. In other words, you can actually safely predict to a high degree the maximum financial losses of each investment, not only in real estate but also in other cases.
Do reflect deeply on the fact that the worst case scenarios of most financial investments is actually a certain event, meaning to say that it is the worse thing that can happened.
The concept of certainty in uncertainty is well illustrated in many of our every day life which wise investors put to good use to achieve their financial goals. You do not have to look far to see how this idea translates into millions and billions of dollars profits consistently in various businesses and almost guaranteed returns in some investments.
First thing first, in the flipping of coins, whether the next flip is a head or tail is uncertain and no one can guess accurately every time but the fact that there will be no 100 consecutive heads or tails is a certain outcome. This is what I mean by the certainty in uncertainty.
In lottery, who will wins the top prize is what no one will be able to guess, but revenue from lottery ticket sales far exceeds that of prize money given out is a certain event for some lottery companies within some countries.
If you looked at the overall performance of the stock market, it is difficult to predict the prices of any individual stocks the next day but that overall the combined value of all the stocks increased substantially over the decades. The same occurs for properties.
Therefore, you should not avoid investing just because there is no guaranteed returns.
