The four most expensive words in the English language are, “This time it’s different.”1  —Sir John Templeton

Understanding that fear or greed can sabotage even the most rational investment plans, I used to agree with the late mutual fund pioneer. But I’ve come to believe that Templeton didn’t go far enough.

In reality, the investment environment is always different, all the time.

We all love shortcuts

We’re all busy. The news cycle is a 24/7 affair, and economic and investment data are available in torrents. Faced with an unrelenting flow of information and extensive to-do lists, we often rely on shortcuts to make sound decisions. Perhaps we seize on the level of price/earnings (P/E) ratios or interest rates and—expecting them to change in some certain way—search for examples from the past when they behaved as we suspect they will in the future. We then extrapolate past performance to justify decisions or recommendations.

Of course, if we are honest with ourselves, there are plenty of reasons to be skeptical about our expectations. Consider that many investors and market pundits:

  • Have been warning about stock and bond market highs. Seven years into a bull market in stocks, the Standard & Poor’s 500 Index, among many other equity market indicators, remains near a peak. Bond prices, too, remain in record territory, as the yield of the bellwether 10-year U.S. Treasury note fluctuates below 2%.
  • Said negative interest rates “couldn’t happen.” Yet here we are, with Japan and much of Europe in the curious economic territory of sub-zero rates.2 Nearly $11 trillion of sovereign bonds worldwide carried negative yields to maturity in as September 12, according to Fitch Ratings.3
  • Have been expecting higher interest rates for years. As shown in the chart below, the yield of the 10-year Treasury note has remained in the vicinity of an historic trough for nearly a decade.

Chart: Yield (%) of the 10-year U.S. Treasury note, January 1, 1980 - September 30, 2016

Investing is not a science experiment

The economy and financial markets—and the performance they deliver from any given starting point—reflect the actions of millions of consumers, investors, businesses, and governments. It is not just the level of P/E ratios or interest rates that motivate all those actors. Instead, there are countless motivating variables—everything from political to environmental to economic developments.

Even if you “know” that, say, the yield of the 10-year U.S. Treasury note is about to embark on an upward march similar to the path it followed between mid-1980 and late 1981, it is impossible to be sure that other capital market developments will unfold as they did 36 years ago. Put another way, investing is not a controlled laboratory experiment.

How to invest in an ever-changing world

Scientists can define the terms of their experiments, isolate vital variables, and often learn what forces affect those variables. As investors, we enjoy no such luxury. Observing how one or two economic or market characteristics resemble their values in the past leaves countless factors unaccounted for—and out of our control.

Of course, we can and should control some aspects of investing. For example, we can make investment plans that reflect well-defined goals, time horizons, and tolerance for risk. We also can favor low-cost, tax-efficient investment vehicles and maintain long-term perspectives. As for the environment in which we invest, we should acknowledge that it is always different, all the time.


1William J. Bernstein, 2002. The four pillars of investing. New York, N.Y.: McGraw-Hill. p. 152.

2In addition to the Bank of Japan and the European Central Bank, the national banks of Denmark, Sweden, and Switzerland have moved short-term deposit rates—the rates they “pay” on bank reserves—below zero. This means the central banks are charging member banks to hold their funds, in hopes of reducing reserves and boosting lending to consumers and businesses.

3Source: Reuters, 2016. Accessed October 10, 2016, at


  • All investing is subject to risk, including the possible loss of the money you invest.