Investing Amid Low Expected Returns: Making the Most When Markets Offer the Least

Imagine a world where the snow falls softly outside, muffling the noise of the bustling markets. You sit by the window, a cup of tea warming your hands, and reflect on the journey of investing. This is not a story of endless bull markets or quick riches, but of serenity—of learning to accept the changing tides and finding peace in the process. The Serenity Prayer, so often quoted in moments of uncertainty, becomes a quiet mantra for the investor: 'God, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.'

For decades, investors enjoyed a golden age. Asset prices soared, yields fell, and the compounding of wealth seemed almost effortless. But beneath the surface, something subtle was happening. As discount rates dropped and valuations climbed, each year’s windfall gain was a quiet borrowing from the future. The markets, it turns out, cannot always offer the bounty we’ve grown accustomed to. We now face an era where expected returns are modest, and the easy gains of the past are unlikely to repeat.

In this new world, the greatest challenge is not finding the next big thing, but accepting reality with humility. Many investors, spoiled by decades of strong returns, struggle to adjust their expectations. Some reach for riskier assets in hopes of maintaining old standards, while others delay hard choices, hoping for a miracle. Yet, the wisest among us remember the Serenity Prayer: focus on what can be controlled—our process, our discipline, our patience.

It is tempting to judge every investment decision by its outcome. When markets are generous, we feel skillful; when they are stingy, we question our methods. But this is outcome bias at work. In truth, luck dominates over short horizons, and even the best strategies will have long, painful stretches of underperformance. The lesson is to judge the quality of our decisions not by their outcomes, but by the soundness of our process.

As the snow continues to fall, remember that serenity in investing is not about passivity, but about calm, thoughtful action. It is about recognizing that the future may offer less, but that with discipline, humility, and patience, we can still make the most of what the markets give us. Let us begin our journey by embracing serenity, and with it, the courage to navigate this new landscape.

Next, let’s explore how history and context have shaped the challenges we face today, and what lessons we can draw from the past to guide us forward.