Hi,
In good times, investors pursue yield as a measure of investment progress. But in uncertain times – when inflation is a threat, interest rates shift, global tensions rise, or the economy slows down – investors’ priorities change. In uncertain times, certainty can be more valuable than yield. It’s not about earning the most. It’s about preserving what’s already been earned.
Why Yield-Based Investments Fail in Uncertain Times
Yield-based investments come with a set of assumptions: a stable market, a stable interest rate environment, and stable economic growth. In a stable market, yield-based investments perform well. But in an uncertain market, the assumptions of yield-based investments evaporate.
In uncertain times, high-yield investments have a tendency to harbor risks that only appear when the market gets volatile. Volatility hits high-yield investments hard because the high yield is based on assumptions about a stable market and stable interest rates.
In uncertain times, the question is no longer “How much can I make?” The question becomes “How much can I lose?” This is where certainty starts to become more valuable than yield.
The Value of Certainty: Reducing Emotional Decision-Making
In uncertain times, investors who invest based on yield-based investments get caught up in the emotional rollercoaster of the market’s fluctuations. Every time there is a market shift, investors get worried.
Assets based on certainty provide a different kind of investment experience—one where investors don’t have to constantly monitor the market and react to every shift in the market. This kind of emotional stability is a value that doesn’t show up on a yield chart, but it’s still a value nonetheless. Peace of mind comes with its own rate of return.
Predictability Is a Luxury During Volatile Markets
In a volatile market, predictability is no longer a given. Currency rates change, interest rates change, and government policies can change on a whim. In such a market, predictability is a luxury that many investors find attractive. In fact, predictability is a powerful luxury that many investors find attractive when everything else is fluid and uncertain.
Why Physical Assets Are So Appealing During Times of Uncertainty
This is why many investors find predictability and certainty in physical assets such as gold when faced with a volatile market. Gold does not pay interest, and it does not make any promises of future growth. In fact, it does not need to make any such promises. Gold has been around forever, and its value has remained constant through good times and bad, through currency fluctuations and economic cycles.
Choosing Certainty Over Optimization
In uncertain markets, the smartest thing an investor can do is not necessarily choose optimization. In fact, choosing certainty is probably the smartest thing an investor can do. When investors choose certainty, they are not necessarily trying to beat the market. In fact, they are probably not even trying to beat anyone else. When faced with a volatile market, investors who choose certainty are choosing stability and predictability as a luxury that many people find attractive. In fact, when faced with a volatile and unpredictable market, certainty is probably the most valuable asset of them all.
