“I think it’s much more interesting to live not knowing than to have answers which might be wrong. I have approximate answers and possible beliefs and different degrees of uncertainty about different things, but I am not absolutely sure of anything and there are many things I don’t know anything about, such as whether it means anything to ask why we’re here. I don’t have to know an answer. I don’t feel frightened not knowing things, by being lost in a mysterious universe without any purpose, which is the way it really is as far as I can tell.”
― Richard P. Feynman
One of the internal struggles of stock market investors, especially younger developing stock investors, is that they often become overwhelmed by what they feel they don’t know. This leads to that uncomfortable internal conflict of trying to be bold and acting with conviction while hiding and suppressing more than a hint of confusion. When investing in the financial markets, especially for those who invest on the individual stock level, there are very few opportunities where you have exact and precise answers to all relevant market factors. By its very nature, there is a more than a decent probability that you may be wrong about one or many factors that contribute to a particular event.
The stock investor struggles with this uncertainty notion every minute of every trading day. “If I only knew the exact answer to this missing piece of the puzzle I could make a fortune!” Nonsense. Knowing everything is not required for success. However, knowing a few things and implementing them well is absolutely required for success.
What you don’t need to know to be an excellent investor;
- Next month’s GDP growth factor.
- What interest rates are going to do next week.
- Whether a company will beat or miss analyst earnings estimates next quarter.
- The impact of El Nino trade winds that will impact global climate factors resulting in corn output in Iowa next August.
Maybe somebody out there knows the answer to these or other economic complexities. But there are many successful investors that don’t and that’s just fine with them.
Here is what you do need to know to be an excellent investor;
- How to always use proper risk management
- How to exhibit personal self-control
- How to look at the same information as everybody else and decide if something is a worthwhile investment opportunity based on a risk/return profile (and have the courage to do nothing if it isn’t).
Investing is all about dealing with uncertainties. That’s what makes the game so fulfilling for those who have a passion for the financial markets. Much like the world renowned physicist Richard Feynman who was quoted at the start of this article (who really was a scientific rock star), you could be quite happy and live an interesting life not knowing most things that impact your profession. He WAS a scientist. His job was dealing with the laws of nature, laws of the universe and calculating the exact measurements of things. His way of life was to seek real truth in absolute terms which could be repeated through experiments to prove their merit.
We aren’t trying to prove anything in scientific terms. We leave that for the economists who believe they are scientists (social scientists…wink-wink) who can’t prove anything in real markets. We are only trying to prove that we can make money by investing well over long periods of time. No more, no less.
We need to be much like Feynman, not absolutely sure of anything but willing to investigate and study never-the-less because we are curious and desire to investigate further. There are many things we won’t know anything about. We don’t have to know an answer to everything. We don’t have to feel frightened not knowing things. Markets are mysterious and always will have a random nature to their personality. Mr. Market’s exact behaviors are un-provable.
We aren’t trying to prove ourselves right. We are trying to prove ourselves wrong with as little cost as possible. Only by acknowledging our mistakes as quickly as possible can we make progress (and money).
If you want to prove a theory for the sake of it, consider becoming an economist. Trading may not be your thing and that’s ok too.