When you know a thing, to hold that you know it; and when you do not know a thing, to allow that you do not know it-- this is knowledge.--ConfuciusInvesting is a bet on an unknowable future. The mark of wisdom in investing is accepting just how unknowable it is. Financial historian Peter Bernstein puts it this way: "You have to keep reminding yourself, we don't know what's going to happen with anything. Ever." Granted, that's not easy. Our brains have a built-in conviction that
the future will be just like the near past (a kind of mental rut that psychologists call "recency" and Wall Street calls "market forecasting.") And we are all too ready believe and act on the pronouncements of pundits, despite abundant and irrefutable evidence that they have no more of a clue than the rest of us. Being humble in the face of uncertainty keeps you from the most expensive investing mistakes. You won't jump on yesterday's bandwagon. You'll respect the risks you are taking. And you'll be more likely to remember the question you should always ask before investing: "What if I'm wrong?"
