Home > Education > Do we need luck to make money?

Do we need luck to make money?

Tuesday, August 14, 2007 Leave a comment Go to comments

I was wondering if one makes money in the markets purely on basis of “skill” or does one also require luck to succeed.The more I study markets, the more I am beginning to believe that you need that “extra” luck also.

Let me give you a very recent example. While doing research to write this week’s Stock Ideas newsletter for my clients, I had shortlisted four stocks -stocks which had the high probability of rocketing! But while writing, I just included three stocks In the newsletter as I was not fully sure about the fourth stock (coincidentally I had spent the most time in researching this one).

Come Monday,lets see what happens:

Stock Idea 1- Locked up in 5% circuit and again up 3% today. Bull’s eye!

Stock Idea 2- Went up 4-5% in two days. Not bad.

Stock Idea 3- Remained flat. A damp squib!

Stock Idea 4 (the one I had left out)- 10% up on Day 1 and followed it up another 5% move today.

I could have easily included the stock in the list but I missed out for whatever reasons(even I can’t exactly figure out why!) Isn’t it funny in some sense?Was it bad luck on my part?

Now lets take a reader’s perspective:

Assumes that he looks at three ideas and decides to invest in Idea 3 (the one which remained flat).Is this bad luck on reader’s part?

Infact, dynamic portfolio selection is a big challenge for any portfolio manager. If you have 100 ideas, how do you filter them out and rank them? How do you deal with situation when “filtered out” stocks start to perform better? These days I trying to find a solution to this problem.Till then-all I can hope for is a bit of “good luck”

What do you guys think?

I recommend that you guys read “Fooled by Randomness” by Nassim Taleb – an excellent piece of work where he discusses the hidden role of “luck” in our lives.

Categories: Education
  1. sam
    Wednesday, September 19, 2007 at 7:58 am

    I vouch, it is Luck which rules or huge capital where you see money playing Waiting game.For short term and Intraday Luck..Luck..Luck

  2. Divakar
    Tuesday, August 14, 2007 at 12:29 pm

    There is a saying in the world That ” we can compete with a skillfull person, not with person with luck”. So surely we need luck to gain in the stock market.

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