The following was the lead item in our monthly e-newsletter, delivered June 9. Subscribe to this free newsletter here.
This newsletter marks 10 years of monthly visits to the inbox of clients and friends of BHJ Wealth Advisors. Thank you for reading. We have covered many topics, some universally important, some minutiae, with the intent of sharing knowledge, hopefully even some wisdom.
You’ve probably heard the phrase knowledge is power. It is a bit of a misnomer. Knowledge is primarily just organized, learned information. Power, or any kind of result, doesn’t come until the knowledge is actionably put to work.
Some knowledge is less useful in that it provides the perception of value but is not actionable or makes little difference on a future outcome.
Nobel-winning psychologist Daniel Kahneman calls this the illusion of knowledge. “The core of the illusion is that we believe we understand the past, which implies that the future should also be knowable,” Kahneman wrote.
We have a lot of knowledge of past investment markets, financial conditions and how people behave and adapt to the world around them. That knowledge can create a false confidence in the ability to predict what will happen in the future and how people will respond to it.
The future is unknowable even when it seems like there may be useful precedent, and knowledge gained from it, in the past.
Because we can’t predict, we prepare. The focus of our work in financial planning and investment management will continue to be preparation for a wide range of potential occurrences and outcomes in the lives of our clients and the paths of investment markets.
Part of preparing is keeping you informed and helping you make decisions based on probability, not certainty.
If you have questions about your personal finances or how your money is positioned, please let us know.
Enjoy the emergence of summer and be well.