| Psychologists have discovered that most healthy, successful individuals are optimistic, even when it doesn't seem warranted. History's greatest investors - from Warren Buffett to Peter Lynch and Sir John Templeton - all had an optimism about the future that simply didn't have an off-switch. That doesn't mean you shouldn't hedge your bets or take concrete steps to reduce risk and volatility. You should. The Oxford Club uses asset allocation, diversification, rebalancing, position sizing, and trailing stops. We hope for the best... but also plan for the worst. Those who both expect and plan for the worst seldom earn high returns. That's why I advocate rational optimism. This starts with the realization that we will always have challenges and setbacks. Yet that knowledge is tempered by an abiding faith in the ability of democratic institutions, innovation, and capital markets to solve our most pressing problems. Rational optimism doesn't mean turning a blind eye to negative circumstances - or never entertaining darker possibilities. Yet there is a huge payoff in seeing gray skies as just passing clouds. Optimism is a source of courage and confidence. It motivates us to set goals and to take risks. It encourages persistence in the face of obstacles. Investors with a positive outlook don't sell in a panic. Nor do they turn up their noses at opportunities in a down market. Investors should balance their optimism with skepticism, however. We are all swimming in an ocean of ignorance about future inflation, interest rates, economic growth, geopolitical developments, commodity prices, currency fluctuations, business developments, scientific innovation, corporate earnings, new and proposed legislation, tax rates, and much, much more. No one knows how all these market-moving factors will play out. And no one ever will know, even with the help of artificial intelligence and quantum computing. That's why I also recommend that investors embrace "epistemic humility." The world is too messy, too complicated - and thanks to human emotions and behavior - too unpredictable for anyone to see around the bend. As the late historian David McCullough often said, "There is no such thing as the foreseeable future." However, there are a few important things that we can say with confidence. People everywhere have economic wants and needs. And businesses compete to meet them. Men and women who want to build a fortune will be incentivized to take the risk of starting or running a profitable business that creates as many satisfied customers as possible. And owning a fractional interest in several businesses in different industries - a diversified portfolio of stocks - is the least risky way to earn high returns. Still, long-term success takes time and patience. And that epistemic humility is bound to come in handy from time to time. In the financial markets, arrogance and big egos get taken down like the Berlin Wall. That means your investment approach should combine an understanding of the present, optimism about the future, and a deep skepticism about anyone's ability to predict or control events. As much as any strategy or recommendation, this realization will be responsible for your success. Pessimists will insist that I'm giving the many problems we face short shrift. I'm not. (And, in any event, you can count on the media to deliver a fresh update every day.) I'm only recommending that - if you want to achieve your most important goals - you should look at problems in a different light. View them as opportunities. Nationwide troubles, personal setbacks, corporate challenges, and even global crises are an inevitable part of life. They always have been. And they always will be. However, history shows that problems are a catalyst for progress. Companies that adopt a problem-solving mindset do not simply react to a crisis. They proactively look for the next one. Since troubles and complications are never-ending, progress is open-ended. And so too are the opportunities for businesses that thrive on problem-solving. In short, the continuous emergence of fresh obstacles is not something for investors to fear. It is something to embrace. Problems push us to innovate, experiment, and find new solutions. For businesses - and investors - this means that the future is chock-full of opportunities. The corporate media - and social media - never make it easy to be a rational optimist. In a world of more than 8 billion people, they recycle - 24/7 - the worst things that happen each day. That's why you shouldn't view rational optimism as a choice... but a habit. Or, better yet, a duty. Good investing, Alex P.S. To read more of my thoughts on how to succeed in business - and in life - click here. | 
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