My friend Elijah and I were discussing investments.
“In the news, Bill Gates and other experts are predicting a recession,” he said.
I was taken aback, but I quickly replied, “They don’t know anything!”
Now it was Elijah’s turn to be surprised.
How could someone like me, who makes a living taking photos and designing websites, argue against the wisdom of many experts and billionaires appearing on TV?
I can say with certainty that most people who speak on TV or any other news format about the economy and its direction know very little.
People are good at forecasting the future, except for the surprises, which often matter the most.
Here are a few examples:
- No economist predicted Covid.
- No economist predicted the war between Russia and Ukraine.
- No economist predicted the recent Israel–Hamas war.
You might say these are unpredictable events that don’t happen every day.
And that’s precisely my point. Every day is filled with unprecedented events that don’t happen every day. We shouldn’t base our investment decisions on the opinions of people who, although successful in the past, know little about what might happen tomorrow in the markets and in life in general.
The biggest risks are those for which we aren’t prepared.
It’s always like that. Every day we are surprised by the unexpected.
It’s like that every year.
As an investor, I am ill-prepared for the unexpected. I have optimized my life and put everything in the stock market. I have no properties and no cash. I recognize that if anything goes bad in the stock market, I have no one but myself to blame. On the other hand, if the stock market continues to perform, I will look and feel like a genius.
Other friends have similar problems. They have put everything into real estate, their careers, or living in the moment.
It’s hard to prepare ourselves for every possible scenario, so for the most part, we don’t. Thus, we are at the mercy of events we could never have expected. Sometimes we will look and feel smart when we place our bets in the right place, and sometimes we will feel like idiots because we didn’t see that event coming.
Where do you think you are lacking in preparations?
Are you saving enough?
Are you saving too much and giving up some of your present enjoyment of life?
Do you have too much debt or not enough?
Even smart people like those who appear on TV, Bill Gates, and the rest of the billionaire club can lose it all because the one thing they didn’t prepare for happened.
Remember Sam Bankman Fried, founder of FTX cryptocurrency exchange? He was ranked the 41st-richest American in Forbes, and now he’s broke, sitting inside a prison cell somewhere. An expert in evaluating risk, he gambled all in cryptocurrencies and lost, with his own life.
As I mentioned before, I have put everything in the stock market, and I am ill-prepared for the unexpected. How about you? What are your weak points?
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