Loss is NOT our Greatest Fear; It is Uncertainty
By: Brian A. Magnan CFP®, AIF®, CEPA®
Director – Magnan Family Wealth Management
I have faith that owning stocks will have greater price volatility and a higher rate of return than lending to a company (bonds). I have faith that declines in the prices of all companies in aggregate are temporary and will eventually recover, leading to higher prices than before.
A loss in itself is tolerable when there is faith in a recovery. However, losses without faith create an intolerable feeling of limitless negative outcomes and usually have devastating results for a wealth plan and overall well-being.
My favorite financial author, Nick Murray, of Simple Wealth Inevitable Wealth, once declared in one of his Master Classes, “Surprise is the Mother of Panic.” Admittedly, I never truly grasped the significance of this quote until the pandemic provided me with the clarity I needed. We are naturally surprised when we encounter uncertainty, and this surprise fuels our panic, leading us to react impulsively and emotionally. In the realm of investment planning, panicking often has severe repercussions for our future outcomes.
Based on my experience, I’ve discovered that only 20% of the expenses associated with a wealth planner are directly related to the actual plan. The remaining 80% is dedicated to maintaining and ensuring that clients adhere to their wealth plan. Our All-Weather Planning Process is meticulously designed to minimize uncertainty, ultimately leading to a life of prosperity.
Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.
Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Magnan Family Wealth Management is a separate entity from WFAFN.
Director – Magnan Family Wealth Management
After decades of wealth planning for individuals, I have come to realize that losses cause exponentially more pain than gains provide pleasure. However, it has become increasingly evident in recent years that uncertainty is the ultimate fear.
- Our brains are hardwired for predictability and control. The amygdala, our brain’s threat detector, is activated by uncertainty, leading to stress responses like fight-or-flight. This evolutionary wiring suggests a strong inherent aversion to the unknown.
- Research indicates that participants anticipating an inevitable painful electric shock felt calmer than those facing a 50% chance of receiving the shock. This suggests that anticipating uncertainty is more stressful than anticipating certain pain.
- High levels of uncertainty are associated with increased anxiety, depression, and psychological distress.
In the world of wealth planning, certainties are rare. We believe that faith can be a suitable replacement for uncertainty in investment planning and life.
I have faith that owning stocks will have greater price volatility and a higher rate of return than lending to a company (bonds). I have faith that declines in the prices of all companies in aggregate are temporary and will eventually recover, leading to higher prices than before.
A loss in itself is tolerable when there is faith in a recovery. However, losses without faith create an intolerable feeling of limitless negative outcomes and usually have devastating results for a wealth plan and overall well-being.
My favorite financial author, Nick Murray, of Simple Wealth Inevitable Wealth, once declared in one of his Master Classes, “Surprise is the Mother of Panic.” Admittedly, I never truly grasped the significance of this quote until the pandemic provided me with the clarity I needed. We are naturally surprised when we encounter uncertainty, and this surprise fuels our panic, leading us to react impulsively and emotionally. In the realm of investment planning, panicking often has severe repercussions for our future outcomes.
Based on my experience, I’ve discovered that only 20% of the expenses associated with a wealth planner are directly related to the actual plan. The remaining 80% is dedicated to maintaining and ensuring that clients adhere to their wealth plan. Our All-Weather Planning Process is meticulously designed to minimize uncertainty, ultimately leading to a life of prosperity.
Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.
Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Magnan Family Wealth Management is a separate entity from WFAFN.