When Investing, You Should Hope for the Best but Expect the Worst

The last 10 months have been like a wild roller-coaster ride.

Not since the depths of the Global Financial Crisis back in 2008-2009 have stock markets been roiled with such volatility.

And it has also been 10 years since companies have faced such a tremendous amount of financial stress.

Of course, we are talking about the latest crisis in our midst: the COVID-19 pandemic.

For investors, it has been an emotional ride as share prices have crashed and then partially recovered.

It’s difficult to know what to expect with all the uncertainty swirling around.

However, one thing that’s for certain is that strong companies will continue to do well and weather this latest storm.

It is, therefore, important to continue to keep the faith and carry on investing.

To be scared out of the markets at this juncture would mean giving up on years of future compounding and wealth-building.

But as an investor, what kind of mentality should you have? And what is the right kind of psychology that can get you through his crisis?

Hope for the best

The German band Alphaville, in their chart-topping song “Forever Young”, sing about “hoping for the best but expecting the worst”, as they wax lyrical about wanting to “live forever”.

Similarly, we should adopt this mindset when faced with investment obstacles.

The idea is to be able to “invest forever” in companies that are resilient and able to grow both their earnings and dividends over the long-term.

To this end, we need to maintain a positive attitude towards technological advancements and be confident about the resilience of the human spirit.

In a nutshell, we should believe that humans can triumph over adversity by tapping on their ingenuity and wit.

It’s this mindset that enables us to stay vested in strong companies as they continue to innovate and make peoples’ lives better.

Expecting the worst

Yet amid all the optimism, we also need to remain cautious and watchful.

It’s important to remember that the world is full of uncertainty and randomness.

Even if an investment decision has been made with adequate research and a good margin of safety, something could still go wrong due to bad luck.

The sudden outbreak of the COVID-19 pandemic is a case in point, catching almost everyone by complete surprise.

This is why we should diversify our shareholders and not put all our eggs in one basket.

As the world is fraught with different kinds of risks, we need to be mindful of how we navigate the choppy waters of the investment world.

Be mentally prepared to make mistakes at times, and also to lose money when that happens.

It’s all part and parcel of investing.

But the key is to not let such obstacles discourage you from soldiering on and investing your money.

A balance of both mindsets

To be successful at investing, you need to maintain a balance between optimism and pessimism.

It’s a delicate balance though.

If you feel too optimistic, you’ll end up chasing expensive stocks and only seeing rosy days ahead.

When reality sets in, everything could come crashing down and wipe you out.

But if you are too pessimistic, then you will pass on almost every investment as you get scared off by the perceived risks.

By doing so, you’ll end up in a situation where your capital lies idle and is not deployed to effectively grow your wealth.

Balancing the two extremes allows you to stay vested in companies that can adapt and grow over time, while also bestowing a sense of caution to not feel too complacent.

This healthy mix of emotions will stand you in good stead through good times and bad and is the type of psychology that you should aim for.

Get Smart: When the going gets tough

Singer Billy Ocean has a comical song titled “When the going gets tough, the tough get going”.

Essentially, the title implies that one may not be able to handle the difficulties that come along when bad times arrive.

But there’s a silver lining to the lyric.

Close to the end of the song, he sings “when the going gets tough, the tough get rough”, implying a mindset that is willing to “rough it out” and endure through challenging times.

As an investor, you should not be scared off when tough times arrive, as they always will.

Instead, you should steel yourself to boldly face the tough times as they will eventually pass.

As an investor, you might wonder what the future holds for the REITs in your portfolio. Or how to select REITs that can make you money as Singapore’s economy struggles to recover from the pandemic.

Download your FREE special REITs report: “How You Can Make Money Investing In REITs As Singapore Recovers” HERE!

Disclaimer: Royston Yang does not own shares in any of the companies mentioned.

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