Investing Rules To Navigate Volatile Markets

While often difficult, investing rules can help us maintain our focus and investment discipline in volatile or uncertain markets. This year, such has certainly been the case with surging interest rates, expectations of a recession, and geopolitical conflicts in two countries. In times like this, it is easy for us to imagine the worst of possible outcomes. However, in last week’s newsletter, we discussed the “probabilities” and “possibilities” of macro outcomes. To wit:

“On Wednesday’s Real Investment Show, I spent a good bit of time discussing the normal distribution of events in the economy. The chart below is a normally distributed “bell curve” of potential events and outcomes. In simple terms, 68.26% of the time, normal outcomes occur. Economically speaking, such would be a normal recession or the avoidance of a recession. 95.44% of the time, we are most likely dealing with a range of outcomes between a fairly deep recession and normal economic growth rates. However, there is a 2.14% chance that we could see another economic crisis like the 2008 Financial Crisis.

But what about “economic armageddon?” An event where nothing matters but “gold, beanie weenies, and bunker.” is just a 0.14% possibility.”


While “fear sells,” we must assess the “probabilities” versus “possibilities” of various outcomes.

Poker is always an easy way to understand this concept.