How to Turn Uncertainty Into Confidence
Most new investors feel uneasy about risk — and that’s normal.
Every time you invest, you’re stepping into the unknown. The secret is learning what kind of uncertainty you’re facing and how to use it to your advantage.
Think about everyday risks: boarding a plane ✈️, crossing a busy street 🚶♀️, or driving in the rain 🚗. You don’t eliminate those risks — you manage them through experience, preparation, and trust in a system that works.
Investing is no different.
What “Risk” Really Means
Before we talk about markets, let’s start with the dictionary to ground the meaning of risk.'
“The chance that an investment (such as a stock or commodity) will lose value.” — Merriam-Webster
“The possibility of something bad happening.” — Cambridge Dictionary
Both definitions outline: risk = possibility + negative consequence. Our brain will quantify both possibilities and consequences (in some cases, there is potential for positive outcomes).
Common Thread | What It Means | Everyday Example |
|---|---|---|
Uncertainty | We don’t know exactly what will happen. | Will your flight be smooth? |
Probability | There’s a measurable chance of loss. | Rain, or maintenance, might delay the flight. |
Consequence | The result if it goes wrong | You arrive late for a hotel check-in or a reservation. You miss a connection to your destination. |
Following the definion, when it comes to investments, we have the following categorization
Fixed income products and bank accounts have no risk.
Everything else has risks, including real-estate investing.
What are you supposed to conclude here? Everything that actually makes money has risk — now you have to quantify the volatility risk and that’s a very different story.
To a stunt double, the risk from falling off a roof isn’t the same as an office worker with no training. The act of falling is the same to everyone, just like an index is the same to everyone, but the skills or ability to tumble, now varies by person adjusting the risk assessment. The same applies to investing — risk is subjective, and contextual.
💡 Did You Know?
In investing, the financial industry turned risk into a math problem called volatility. But volatility isn’t risk — it’s motion. You only lose money when you react to it.
The Investor Profile Questionnaire — Comfort Isn’t the Same as Confidence
While financial advisers do not have a fiduciary duty to the investor, they do approach advising methodically with documents to ground the conversation between the advisor and the investor.
Once you understand what risk really means, it’s easier to see why traditional investor questionnaires can still lead you to play it too safe. They’re designed to match your investments to your comfort level — but comfort and success don’t always align.
Used correctly, a risk profile should help you understand two types of risk capacity😀
Type | Definition | Implication |
|---|---|---|
Ability to take risks | Your financial capacity — income, time horizon, savings. | Long horizons allow for more volatility. |
Willingness to take risks | Your emotional tolerance for seeing losses. | Determines how likely you are to stay invested. |
Most questionnaires capture both — but the way the results are used can still be misleading. If you score low on emotional tolerance, the recommended portfolio will likely emphasize comfort, not performance — even if your time horizon says you could handle more growth.
That’s where experience and education make the difference. You can train your willingness to match your ability, the same way a new driver builds confidence with practice.
These questionnaires protect you from volatility — not from inflation or underperformance. The risk profile moves away from assessing risk to assessing your comfort level towards volatility.
That’s where education and experience change everything. You can train your willingness to take risk to match your ability, just as a new driver becomes confident after more time behind the wheel.
💡 Did You Know?
A questionnaire can measure your fear, but only education can build your confidence.
The goal isn’t to match your emotions — it’s to grow beyond them.
Meet Neo & Morpheus - New Clients with the Matrix Investment Corp
We’ll cover a couple of personas to highlight how the questionaires can be too conservative, or how a lack of knowledge often leads investor to start too conservative — and lose years of performance along the way.
Neo : A 20 years old new investors wanting to retire on income
Morpheus : A 35 years old savvy investor wanting someone else to do the work now
They each answer the following questionaire. Neo scored 39, and Morpheus scored 61. You can see how they land with the process.
The thing is, Neo is me in 2000, and Morpheus is me 10 years later. The difference is that I educated myself in the market (its behaviour), and with various investing strategies.
A fact is that equity investments are volatile, but risk is subjective. Risk is personal due to the context and understanding of the situation at a point in time. The younger me wasn’t pleased with mapping and didn’t feel I should have bonds in my 20s. I started questioning and learning. By the time I was 35, I ditched my financial advisor but lost years of growth.
The questionaires are not really going over the true consequences. If you go through all the various questionaires, you’ll see they are similar but the consequences of the decisions are clear. It’s lacking an educational angle. It’s like going to school, taking the test first, scoring you, and then you get the education as you invest.
Here is another breakdown from another questionaire. For some reason, you can’t find 100% equity. The target date funds are popular with the company plans.
Where Certainty Ends and Growth Begins
Every investment sits between certainty (fixed-income) and uncertainty (equity). Uncertainty is usually followed by volatility with no investment immune to market corrections.
Here a quick reference table on how to view various investments.
Characteristic | 💰 Cash / GICs / HISA | 🧾 Bonds (Gov’t + Corporate) | 📈 Stocks (Dividend + Growth) | 🎲 Speculative / Alternatives |
|---|---|---|---|---|
Principal Certainty | ✅ Guaranteed | ✅–⚠️ High but not absolute | ❌ None | ❌ None |
Value Fluctuation | 🚫 None | ⚠️ Moderate | ⚠️–🔥 High | 💀 Extreme |
Real Certainty (after inflation) | ❌ Lost to inflation | ⚠️ Often lags inflation | ✅ Historically strong | ❌ None |
Typical Annual Return (Canada) | 2-4 % nominal | 3–6 % | 7–12 % | Variable |
Key Insight | Feels safe but erodes buying power | Safe if held to maturity | Uncertain short-term, reliable long-term | Uncertainty is the product |
I am often asked to share safe investments. It usually comes from investors who need more return than fixed-income but they don’t want to lose value. This is where the conundrum comes in. In this case, they are looking for the least volatile stock and yet, least volatile also means least return on investment.
The Market You Hear About Is an Index
When you hear “the market is down 10 %,” it refers to a stock index — S&P 500, NASDAQ, or TSX Composite.
These are various investment strategies used by DIY investors to reach their financial goals. The base line is often index investing.
Strategy | Description | Volatility Profile | Approach | Example |
|---|---|---|---|---|
Index Investing | Own the entire market via ETFs. | ⚖️ Balanced | Buy broad ETFs (VFV, XEQT). | Passive set-and-forget. |
Dividend Growth | Own rising-dividend companies. | ⚙️ Moderate | Hold blue-chips. | Costco, VISA. |
Covered Call / Income ETFs | Trade upside for income. | 💵 Moderate – High | Use yield ETFs. | ZWB, HDIV. |
Active Stock Picking | Select individual stocks. | 🔍 Variable | DIY or advisor. | Quality picks. |
Speculative / Thematic | Bet on trends. | 🚀 High | Short-term plays. | AI, crypto, green tech. |
What Actually Happens in a Market Crash
When people hear “the market crashed” it sounds like a mysterious disaster. But a crash is simply a chain reaction — a mix of economics, technology, and human emotion.
Let’s break it down 👇.
Stages | What’s Happening | Investor Emotions in Real Time |
|---|---|---|
1️⃣ The Trigger — Bad News Hits | Earnings disappoint, rates rise, or scary headlines appear. Big funds start trimming exposure. | 😟 Uncertainty: “What’s going on?” News anchors sound tense; investors feel uneasy but hopeful. |
2️⃣ The Slide — Big Money Moves First | Institutional investors sell billions to rebalance portfolios. Prices start dropping quickly. | 😨 Disbelief: “It’ll bounce soon.” DIY investors start checking portfolios daily. |
3️⃣ The Avalanche — Algorithms Take Over | Trading systems detect momentum and sell automatically, accelerating the fall. | 😰 Panic: “I can’t watch this.” Phones light up red; sleep disappears. |
4️⃣ The Capitulation — Retail Panic | Fear peaks. Many sell at the bottom to stop the pain. | 😢 Despair: “I’m done with investing.” Losses feel permanent. |
5️⃣ The Quiet Phase — Buyers Return | Dividend reinvestors and long-term funds start buying discounted shares. | 😶 Exhaustion: “I’m sitting out.” Most investors miss the quiet bottom. |
6️⃣ The Recovery — Confidence Creeps Back | Earnings stabilize, optimism returns, markets rise again. | 😊 Relief & Regret: “It’s finally over… I shouldn’t have sold.” |
Emotional Takeaway
Market crashes aren’t financial failures — they’re emotional storms.
Prices fall because people panic, bot because businesses disappear. The price drops trigger Index ETF rebalancing which is automated and there is a viscious cycle for a short period of time.
Those who stay calm through despair will generally recover in time. A bad business is a bad business that those might not recover, but the overall market will recover.
Perspective
Think of a stock market crash like turbulence on a flight:
The plane isn’t broken — it’s just hitting unstable air for a certain period.
The pilot (the market) adjusts and keeps flying.
The passengers who stay buckled in arrive safely.
The few who didn’t buckled may jump mid-air … and get injured (sell in the down market)
When Fear Takes Over — The Real Test of an Investor
Every investor has felt the panic when markets fall. What you do next defines your future.
Choice | Emotional Logic | Short-Term Comfort | Long-Term Consequence |
|---|---|---|---|
Sell to cash | “I can’t watch it drop.” | Relief | Miss recovery → permanent loss. |
Stop investing | “I’ll wait until it feels safe.” | Calm | Lose compounding years. |
Stay invested | “This hurts but recovers.” | Uneasy | Full growth and dividends. |
History of Fear — and Why Markets Always Recover
Every crash since 2000 recovered within 2–5 years.
Year | Event | Market Drop | Recovery |
|---|
2000–2002 | 💻 Dot-Com Crash | –45 % | 5 yrs |
2008–2009 | 🏦 Financial Crisis | –50 % | 4 yrs |
2020 | 😷 COVID Pandemic | –34 % | 6 mo |
2022 | 📈 Inflation + Rates | –20 % | 2–3 yrs (ongoing) |
30-Year Consequences
Here is what it can cost you if react emotionally during a market downturn. The difference between panic and patience is a lifetime of freedom.
Investor | Year-1 Decision | 30-Year Value | Outcome |
|---|
Sell → Cash @ 2 % | Locks loss | ≈ $181 K | Barely doubles. |
Wait 5 yrs | Misses recovery | ≈ $575 K | Half potential. |
Stay Invested | Rides volatility | ≈ $1 M + | 10× growth. |
Inflation in Real Life — The 🍔 Big Mac Index
You don’t need governments to tell you what the inflation is like. Check out the price of a Big Mac at McDonald every now and then.
Year | Average Canadian Price | % Increase vs Prior Decade | What $10 Buys You Now |
|---|---|---|---|
2000 | $3.33 | — | ≈ 3 burgers |
2010 | $4.19 | +26 % | ≈ 2 ½ burgers |
2020 | $5.67 | +35 % | ≈ 1 ¾ burgers |
2024 | $7.19 | +27 % | ≈ 1 ⅖ burgers |
In 25 years, the price of a Big Mac has more than doubled. Your dollars buy less than half as many burgers as in 2000.
When a “safe” account earns 4% while prices rise 3%, the real gain is barely 1%. The bun keeps shrinking even if your balance doesn’t.
🍟 Mini Takeaway
“Safety” in nominal dollars can be a risk in disguise. The real question isn’t “Will my balance go down?” — it’s “Will my money still buy the same Big Macs in the future?”.
Just because you have control doesn’t mean you need to act on your emotions. You can’t control the price of gas at the pump during a war, you can’t control how COVID happened, always take a step back and assess the macro and micro picture.
Sleeping at night is a cop out excuse. While you seek psychological safety, educating yourself is what helps sleep at night.
Let’s step away from investment products for a moment. Most people don’t dream of owning “stocks” or “bonds.” They dream of freedom — reaching the day they no longer have to work for money.
So imagine your goal is to build $1 million for retirement. You save $10 000 per year and earn different average returns depending on how cautiously or ambitiously you invest.
Here’s how long it would take:
Average Annual Return | Years to Reach $1 Million | Hidden Impact of Safety, or Volatility Avoidance |
|---|---|---|
2 % | ~39 years | Nearly four decades — safety becomes a lifetime of saving. |
4 % | ~33 years | Feels responsible, but pushes retirement far into the future. |
6 % | ~28 years | A balanced, realistic timeline for moderate investors. |
8 % | ~25 years | Typical long-term equity compounding — freedom within a career span. |
10 % | ~22 years | Strong portfolio growth with normal volatility. |
12 % | ~20 years | Active or higher-yield strategies shorten the journey dramatically. |
14 % | ~18 years | Aggressive compounding — not for everyone, but illustrates the power of time and return. |
The difference between earning 2 % and 8 % isn’t just six percentage points — it’s 14 extra years of your life still spent working. Between 2 % and 14 %, it’s over two decades of freedom lost.
Understanding Risk at the Strategy Level
So far we’ve explored what risk is as opposed to volatility. Now let’s look at the intrinsic risk inside investment strategies — like choosing how to travel.
Every path involves risk — the type simply changes. Choose the vehicle that fits your destination, timeline, and comfort with turbulence.
Analogy | Strategy | Control / Comfort | Risk Type |
|---|---|---|---|
🧍♂️ Shore | Cash / GICs | Feels safe | Inflation & opportunity risk |
🚢 Cruise Ship | Index Investing (ETFs) | Low — smooth ride | Market risk (aka volatility) |
🚗 Car | Dividend Growth Investing | High — you steer and brake | Company / Business risk |
✈️ Airplane | Growth / Tech / Active | Limited control — turbulent | Volatility & valuation risk |
Many investors will end up blending strategies the closer you get to retirement. It’s a simple factor of having some level of control and part of a winddown strategy.
From Fear to Confidence — Mastering Risk Through Knowledge and Emotion
Confidence is built through education + discipline.
Learn About | Why It Matters | Start Here |
|---|---|---|
Market recoveries | Downturns are temporary. | History tables like above. |
Dividend growth | Income rises in declines. | Dividend Aristocrats. |
Inflation | Shows why “safe” is risky. | Big Mac Index. |
Tax accounts | Optimize returns. | RRSP / TFSA guides. |
Master Your Emotions
Learn to identify your emotions to respond appropriately with your portfolio.
Confidence isn’t fearlessness — it’s acting wisely despite fear.
Trigger | Typical Reaction | Confident Response |
|---|---|---|
Market drop | “Sell!” | “I planned for this.” |
Rally | “FOMO buy.” | “Stick to plan.” |
Scary news | “Pause.” | “Headlines fade.” |
Compare returns | “Others do better.” | “I invest for me.” |
Investor Confidence Checklist
✅ I know that risk ≠ loss.
✅ My investments fit my time horizon.
✅ I understand inflation is a silent risk.
✅ I expect volatility and plan for it.
✅ I invest consistently, not emotionally.
✅ I measure progress in years, not weeks.
Final Takeaway
Risk isn’t the enemy — misunderstanding it is.
Uncertainty + time + knowledge + discipline = lasting wealth.
The goal is not to avoid risk but to master it — with clarity and confidence.