The Anxiety of the Unknown

Which message on a flight departure board would distress you more?

1. Flight BA 786 - DELAYED

2. Flight BA 786 - DELAYED 70 minutes

The second message is a bit of a pain, but at least you have some control of the situation.

You can determine how you want to spend the next 70 minutes and start re-planning your day. 

On the other hand, the first message is a form of mental torture.

You know there is bad news, but you do not have sufficient information to respond to it.

The above example is from the book Alchemy by Rory Sutherland.

Elsewhere in the book, Sutherland shares that most people wrongfully think Uber disrupted taxis because it reduced the wait time for a ride.

But he argues that it's actually because they eliminated the uncertainty of waiting.

Eliminating the uncertainty of waiting made taking an Uber significantly less frustrating.

In a nutshell, these two examples offer insight into the frustrations of investing through down markets.

We rarely voice it this way, but it's not necessarily the waiting that's difficult...

...it's not knowing how long we'll have to wait for the market to recover that causes the majority of investor anxiety.

To test this theory, let's say that in six months or two years (or any time frame), we knew the market would recover back to all-time highs.

Knowing that, how might that impact how you view our current downturn?

I'm guessing you would probably have more patience and a higher tolerance for volatility because you would know when it would end.

Having this information would also allow you to make some changes if changes were required.

Unfortunately, this type of certainty doesn't exist in the world of investing, so we often find ourselves frustrated.

But uncertainty is an unavoidable truth throughout our lives, which is an interesting parallel.

For instance, on a personal level, we know that life is full of good and bad surprises.

The difference is that nobody is blasting out a play-by-play announcing this uncertainty every day as they do about the financial markets.

More so, when we have a bad day, bad week, or bad six months, there are no pundits predicting that everything is hopeless and that our lives will never improve as they do with the market.

So, it's not that the markets are more uncertain than our lives; it's just that the uncertainty of the markets is so much more apparent thanks to the continuous news cycle.

If you are a client reading this, I believe the best way to overcome the anxiety of the unknown is to remind yourself that we have planned for periods like right now.

We may not have been able to foresee the specifics of this situation, but we have planned for—and are prepared for—extended periods of market downturns.

Turn off the TV, take a deep breath, and take comfort in this fact. You are okay.