Harnessing the power of ‘what ifs’ in investing

HUMANS dislike uncertainty. We constantly seek explanations for why something has happened. Then we use these “reasons” to extrapolate what is going to happen in the future. If these shortcuts are relationships that have held over very long periods of time, they can be useful.

However, all too often their explanatory power is suspect at best and gives us a false sense of security about the future. This means that we are often surprised and disappointed that things did not turn out as hoped. We ask: How could we be wrong?

The good news is that there is a great antidote to this hardwiring of the brain. Rather than trying to predict the future, especially the short term, it can be helpful – and even liberating – to embrace the fact that the future is unknown and plan for different scenarios.