Now it seems obvious that we had to ‘lock down’ New Zealand. Despite the fact that we knew of the virus in February, the impact and devastation were unknown. It made sense to everyone at the time, that it wasn’t a big deal. Lock downs were not obvious at the time.

Now it seems obvious why stock prices are going great. Lots of government money and low interest rates. Earlier in the year though it made sense that shares would not be going so great with job losses and business closures.

Now it seems obvious that the Warriors would not make the top eight playoffs. Earlier in the year……oh wait. Not a good example.

As humans, we are always trying to make sense of the world. When something happens, we want to know why. It gives us comfort and confidence when navigating our daily lives to know that what we believe is to be true, is actually true. When proven wrong, we reframe our thinking. “Oh yeah, that was obvious”.

We convince ourselves that we understand things that we don’t.

Almost every movement in the share market is obvious after the fact.

This is dangerous thinking because the more we convince ourselves we were right when we were wrong, the more bullish we get. We become too confident in our abilities. We regress our losses from our memory. All this results in poor decisions and taking on too much risk.

No matter how certain something felt after the fact, you can be sure there were a wide range of other possible results at the time. None of which eventuated.

So stop having such a narrow focus of the world, and understand that all situations can have multiple eventualities. Sometimes, the result coming down to timing or luck. Accept that the world is uncertain and we don’t have control over everything. Don’t beat yourself up when things don’t go as planned. Realise that is normal and by having a wide lens, you actually were expecting the unexpected. Maybe even wondering what took it so long.

There are not many traits more dangerous to your financial planning than overconfidence. If you put too much on the table and aren’t prepared or able to afford a loss, you will be left in a precarious financial situation.

The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here