As investors, we often focus on predicting what will happen in the economy and investment markets, but the truth is, we can’t predict the future. A better way is to plan for what CAN happen.
While we expect our investments to have positive returns and inflation to be modest over the long term, we plan for a range of potential outcomes.
For example, news could be much better or worse than expected, and inflation could be higher or lower than anticipated. As a result, we could have very good returns in some years and not so good ones in others.
One way to plan for unexpected events is to diversify your investments. Last year was a perfect example. Those heavily invested in technology stocks suffered poor returns. But investors with energy stocks in their portfolio saw a better outcome.
In short, planning for what can happen is essential in investing. We can’t predict the future, but we can be prepared for it.