You ever heard someone say, “Hope for the best, but prepare for the worst”? It can come across as if the best is merely a wish, and the worst is more likely. It feels more glass half-empty than half-full.
Buy the generator before the power goes down for days. Get a spare tire before you are stuck in the desert with a flat. Sell your stocks before the market crashes. You get the idea.
And it’s not a bad one. All of those things happen, and in certain parts of the country some of them literally just happened. So there is a ton of wisdom in preparing for the worst in life and with money. But let’s flip that axiom on its head.
There can also be a sense in which we can hope in the worst and prepare for the best. Notice I switched “in” in the place of “for”. That’s critical. We should never be the kind of person that hopes for the worst or takes pleasure in economic suffering. No way.
You should, however, train yourself to be the kind of investor whose psychological orientation is prone to take action in dark moments with an expectation of a brighter future. Buying some—instead of selling all—when markets are down. Innovate and act—instead of staying stuck, prepping for only bad days to come—in a crisis. Is this always possible? Of course not. This takes preparation too.
Being optimistic when everyone else is pessimistic is not easy. Seeing the economy and markets as cyclical and future growth as on the horizon when everything is flashing red is hard. But preparing for the best in the midst of the worst can be wise too and may have enduring financial gain. Crises can be great opportunities.
What if the 500 biggest publicly traded companies in America really are higher in a decade, as it has been over 90% of the time between 1926 and 2018?1 What if innovation and technology lead to further breakthrough in healthcare and daily life that are beneficial to humanity?
What if the next big market dip ends up being a great buying opportunity like the last one in 2020 appears (at this moment) to be? Will you be ready to act? It’s much easier to implement a plan for that scenario now because it will be harder to do so then.
Is your portfolio constructed in such a way that not only prepares for the worst in line with your risk tolerance, but also prepares for the best to meet your future goals? Be the kind of financial prepper that preps for the best too.
1. Nick Murray, Simple Wealth Inevitable Wealth, p. 64.