by Phil Lebkuecher | Jul 28, 2023 | Behavioral Finance | 0 comments
We all want desirable outcomes – those outcomes that bring us happiness, peace, and prosperity. Because we desire such outcomes, we may go into situations having high expectations. But it may be more beneficial to temper our expectations if we want to experience greater contentment in life.
Disappointment & Contentment
Disappointment occurs when a situation or outcome is worse than we expected. By intentionally setting expectations low, such as expecting long lines at the airport and flight delays, we decrease the likelihood of becoming disappointed or angry when “life happens.”
Contentment, on the other hand, results from situations our outcomes that exceed our expectations. When we lower our expectations, we put ourselves in a position to be pleasantly surprised more often, such as when we breeze through security and our flight arrives a few minutes early.
When we set expectations for something, we should consider how much control we have over the situation. If we have a great deal of control, we may feel confident setting high expectations for ourselves. But when things are out of our control, we should consider keeping our expectations low.
Most investors want to achieve high rates of return with little fluctuation in value. Assuming a given (and acceptable) level of risk, the higher the return, the better. But we should be careful to keep our investment hopes and desires separate from our investment expectations.
When we temper our investment expectations, we are in a better position to handle market surprises. Every year the market surprises us. Tempered expectations empower us to enjoy the positive surprises and put us in a healthy mindset to handle and adapt to the negative surprises.
I have found that the best expectations for investors are a combination of realistic optimism for the long term coupled with the expectation that, in the short term, markets may not make sense and often fluctuate considerably.
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