Investing is a bit like exploring a remote jungle. It’s probably not a good idea to recklessly charge through the forest, believing we can tell where every snake, spider, or jaguar might be hiding. We just cannot possibly know. But equally, we won’t get very far if we try and hike in full body armor.
The best approach is to be cognizant of the risks that surround us, so we can react calmly if they emerge, but to keep moving along our predetermined path and deviate only if we see clear openings or obvious danger en route.
 
If you roll the dice often enough you’ll roll snake eyes eventually. And in recent years we need only look to Lehman Brothers’ collapse or the Eurozone crisis to see the severe impact such events can have on risky assets. Within a month of Lehman’s collapse the S&P500 had fallen close to 30%, and the Eurozone crisis caused the region’s banks to trade back at levels not seen since the late 1980s.
Worse, it is very difficult to predict the timing, concentration, or severity of such events, let alone those of true “black swan” events such as natural disasters, epidemics, flash crashes, or wars. We live, and have always lived, in a highly uncertain world that has gotten more unstable for investors as technology has accelerated the velocity of information.
Investors are faced with a persistent dilemma, then. Investors today need to take risks. But they cannot predict them, and want as little exposure as possible.
 
The ambush predators, including some that we don’t even know exist, are still lurking, but for now the path through the forest is wider.
Overall, we expect global economic growth to pick up to 3.4% in 2014, from 2.5% this year, making 2014 the first year of accelerating global growth since 2010.

It’s a jungle out there (PDF)