Learning to Make Decisions Under Uncertainty 28Aug2026
(This is my 532nd blog since 2010. Over the years, I have covered global financial markets, with a focus on India, and continue to share insights to help readers understand complex topics in simple language.
The views expressed here are for information purposes only and should not be construed as a recommendation or investment advice. While the author is a CFA Charterholder with nearly 25 years of experience in financial markets, this content is intended to share general insights and does not constitute financial guidance.
Please consult your financial adviser before taking any investment decision. Safe to assume the author has a vested interest in stocks / investments discussed if any.)
One of the most important skills an investor can develop is the ability to make good decisions under uncertainty.
Financial markets are uncertain by nature. Information is incomplete, circumstances change, outcomes are often unpredictable and volatility is unavoidable.
Yet during periods of market stress, the natural instinct is to seek certainty — to understand what happens next, protect capital from further losses and wait for greater clarity before acting.
The problem is that markets rarely provide that clarity when it matters most.
When financial history is studied, one recurring feature stands out: there is always some form of regime change or regime shift. As the cliché goes, history rhymes, but it does not repeat.
Human behaviour remains remarkably consistent. Fear, greed, optimism, panic and overconfidence are permanent features of financial markets. But the circumstances in which these emotions play out are constantly changing — interest rates, inflation, technology, regulation, geopolitics, global linkages and policy responses.
Consider the difference between the pre-COVID and post-COVID worlds. Much of the 2010–20 period was characterised by relatively low inflation and low interest rates. The post-COVID environment has been very different, shaped by higher inflation, higher interest rates and significant disruptions to global supply chains.
Same markets. Many of the same participants. But very different underlying conditions.
This is why history does not repeat: regimes change. But history rhymes because human behaviour does not.
The challenge becomes particularly visible during sharp market sell-offs.
When prices fall rapidly, it can seem obvious that the sensible course of action is to sell, wait for the uncertainty to pass and buy back at lower levels. This is where overconfidence and the illusion of control can become dangerous.
Investors tend to overestimate their ability to time exits and re-entries. They also overestimate their ability to act decisively when markets are moving rapidly and emotions are running high.
In reality, prices can move faster than information can be processed. New information can change the probabilities. Narratives can shift overnight. What appears obvious today may look entirely different tomorrow.
Market timing requires being right twice: selling at the right time and buying back at the right time. Even professional investors struggle to achieve both consistently.
A recent example was the market turmoil following the outbreak of war against Iran on 28Feb2026. The resulting disruption around the Strait of Hormuz created significant uncertainty around energy supplies and oil prices, with potentially serious implications for India's economy.
Indian equities experienced a severe drawdown during March, while uncertainty continued into early April.
At the time, however, nobody knew how long the disruption would last, how far oil prices could rise, how the conflict would evolve or how governments, central banks and markets would respond.
Yet those were precisely the circumstances in which important investment decisions had to be made.
In hindsight, decisions made during March and April may appear obvious because subsequent events are known. They were not obvious at the time. The investors who were able to assess the risks, tolerate the volatility and act despite the uncertainty were subsequently rewarded as the outlook evolved and markets recovered.
John Templeton offers a remarkable example from September 1939, when Germany invaded Poland. He reasoned that if the conflict developed into a world war, demand for a vast range of American products would surge, potentially benefiting a large number of American businesses.
He opened the Wall Street Journal and identified 104 companies trading at one dollar or less and invested USD 100 in each.
After five turbulent years, he had made a profit on 100 of the 104 investments and, according to the account, turned his USD 10,400 into roughly five times that amount. He did not know how the war would unfold; he simply recognised an asymmetric opportunity amid extraordinary uncertainty.
The lesson is not that every sell-off is a buying opportunity, nor that investors should attempt to predict the bottom.
The deeper lesson is that uncertainty itself should not become a reason for paralysis.
The more useful question is not, “Can the market be predicted?”
It is, “Can a sensible decision be made without knowing what happens next?”
It helps to separate what can be controlled from what cannot.
Market prices, economic outcomes, geopolitical events and the timing of the next shock are beyond our control. Volatility cannot be avoided, and no one knows the exact top or bottom.
What can be controlled is how decisions are made.
Assess the risks before investing. Consider different possible outcomes rather than relying on one prediction. Set clear rules before emotions take over.
Avoid knee-jerk reactions. Scale decisions gradually when appropriate. And judge a decision by the quality of the thinking behind it, not simply by whether the eventual outcome was good or bad.
Risk aversion should not mean avoiding risk altogether. It should mean understanding the risks being taken, assessing the range of possible outcomes and sizing decisions accordingly.
The goal is therefore not perfect market timing. It is effective decision-making under uncertainty.
Good investing does not require certainty about the future. It requires the ability to act when the future is uncertain — while remaining aware of what is known, what is unknown and what could change the assessment.
Uncertainty is not something to conquer.
Volatility is not something to fear.
Both are permanent features of financial markets.
The real investing skill is learning to navigate them without being overwhelmed by fear, greed, overconfidence or the illusion of control.
The objective is not to become certain about an uncertain future.
It is to become comfortable making sensible decisions without certainty.
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References:
Tweet thread 22Mar2026 on embracing uncertainty and volatility
The Pitfalls of Market Timing – And Why FOMO is Your Worst Financial Adviser 12Jul2025
Richer, Wiser and Happier: How the World's Greatest Investors Win in Markets and Life - by William Green
