Investing in capital markets means taking your medicine. I mean that markets have an incredible consistent habit of reminding us that over short-term periods they are wildly unpredictable.

Sometimes even when you are wrong, you are right, and when you are right you are wrong. Wait is that right? Case in point the behavior of the markets post election. I like many assumed a Clinton victory. I was wrong, medicine taken there.

I, like many others thought that a surprise Trump win might lead to a drastic overreaction to the downside in markets. I thought it would be potentially excellent tactical buying opportunity. Here I was right, and I was wrong. The markets did drop, and they dropped fast, futures traded down 5% over night until trading was halted. However, this short-term downswing was much shorter than I expected (I had thought at least a week like the Brexit swing) as markets recovered the following morning. Markets have been climbing ever since. Take a little more medicine on that one.

What was great about this recent activity in the markets is that it reiterates and important investing point. You can always be wrong. You can put in the time, the research, have sound logic, be well educated, etc., but you can always be wrong when dealing in capital markets.

Knowing that we can always be wrong is why we diversify our portfolios. It is why we use a broad benchmark like the Vanguard World as a framework to build our equities portfolio.

Knowing that we can always be wrong is why as investors we scrutinize over our asset allocation, and make sure we have the right mix of stocks, bonds and cash in our portfolio in relation to our goals, time horizon, and cash flow needs.

If we were never wrong we could make wholesale shifts in our portfolios into and out of different types/categories of securities. We can’t do that, so we ask and analyze “what happens to our portfolio if we are wrong? What are the different ways we could be wrong?”

We as investors always have to be ready to take our medicine, because Mr. Market is really unpredictable over short-term periods.