One of the things you often hear from motivational gurus is that the most important thing is neither the past nor the future, but the present.

“Do not dwell in the past,
Do not dream of the future,
Concentrate the mind on the present moment.”
(Buddha)

I agree on the importance of being focused on the here and now in life, but when it comes to investments, this advice doesn’t quite apply. In fact, in the world of investing, the present doesn’t really exist.

Why? Because investment decisions are inherently tied to the past and the future—not to the present moment.

The Present Doesn’t Exist in Investing

Imagine you’re asking: “How much does this investment return?” This question might sound familiar, but it’s actually meaningless when it comes to investments that carry risk. The present is a snapshot in time, and when it comes to risk, there is no “return” in the moment—only a historical one or an expectation about what could happen next.

Let’s break it down:

• The Past: “How much has it returned?” This refers to a historical fact. It’s something that has already happened, and we can measure, discuss, and reflect upon. Past performance is useful for analysis, but it’s not a guarantee of future success.
• The Future: “How much will it return?” This is the critical part. The future is what you’re ultimately investing for. But the future is unpredictable—it’s an expectation, a forecast, not a certainty.

The challenge lies in the fact that, as investors, we make decisions now that affect the future, all while being influenced by the past. This “anchoring” effect, as psychologists call it, can make it difficult to make objective, future-focused decisions.

The Real Power of Time in Investing

Understanding the relationship between past, present, and future is key to making smarter investment choices. While the present moment may seem all-important in many aspects of life, in investing, it’s the combination of understanding past performance and anticipating future outcomes that should guide your decisions.

Take, for instance, the common mistake of focusing too heavily on current market trends. The “here and now” might suggest an immediate investment opportunity—stocks are soaring, or a particular sector looks hot. However, if you’re driven only by the present moment, you might overlook long-term trends or historical cycles that tell a different story.

This is why balancing the three dimensions of time is essential. Here’s how you can apply this to your investment strategy:

1. Learn from the Past: Review historical performance, but understand it’s not a prediction of future returns. It can, however, help you avoid common pitfalls and make informed decisions.
2. Manage Current Expectations: The present provides a snapshot of the market, but remember that it’s full of noise. What’s happening today may not be indicative of what will happen tomorrow.
3. Be Mindful of the Future: The future is where your wealth grows, but it’s uncertain. Focus on managing risks and aligning your investment decisions with long-term goals, not short-term fluctuations.

A Practical Example: The Stock Market and Long-Term Growth

Consider the stock market. In the short term, it can be volatile. If you base your decisions solely on the present moment—let’s say reacting to daily price movements—you might miss out on long-term growth opportunities. However, if you anchor your investments to your long-term goals and historical trends (e.g., the market’s historical ability to grow over time despite short-term downturns), you’re more likely to make decisions that benefit you over the long haul.

Conclusion: Don’t Forget the Three Dimensions of Time

So, when you’re navigating the world of investments, remember: the present is only part of the picture. By looking at past trends and keeping a clear focus on future potential, you can make smarter, more informed decisions that align with your financial goals.

How do you currently approach the “present” in your investment strategy? Take a moment to reflect—are you anchored too much in the here and now, or are you considering the bigger picture?

Investing isn’t about the present. It’s about understanding the forces of time and making choices that will pay off in the future.