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The Luckiest Investor

When things go well, investors have a tendency to reflect on how smart they are. And when things go badly, well, that’s surely just bad luck, right?

This preferential bias towards our own perceived excellence is difficult to escape. After all, this bias makes up who we are as people, yet alone as investors. We actually cannot see the world in any other way.

"It’s rare to meet an investor who openly admits that they have no idea what’s going on"

And this is somewhat of a good thing; without some sort of personal confidence at our ability to build a healthy level of wealth to fund a fruitful life for ourselves and our families, would we even bother trying? In fact, without this confidence, staring at the stock market would be like staring at a blackhole; mysterious and scary. 

With all this in mind, it’s rare to meet an investor who openly admits that they have no idea what’s going on. What’s even more rare, is when this investor is a Melbourne-based fund manager who has accumulated a small personal fortune of $46 million, achieved solely through investing in the stock market.

This Melbourne-based fund manager, who unsurprisingly chose to remain anonymous (apparently admission of cluelessness is bad for business?) admitted that most of the time, he has no idea why some stocks do well, and why others go so badly.

Over his career of funds management, he has kept a diary, where he writes down the reason behind why he has bought a particular stock. Then upon sale of that stock, he notes down the market factors that caused that stock to ultimately be a good choice or a bad choice.

"75% of the time, the reasons behind why he purchased a stock, were not the reasons a stock went up"

Through his own record keeping, 75% of the time, the reasons behind why he purchased a stock, were not the reasons a stock went up; 75% of the time, he was wrong. Yet somehow, and for some reason, he persevered; he persevered in the face of his own record keeping and his own awareness.

This man is the lucky investor. And he knows that his luck has run out, which is why he is calling it quits on funds management.

But let this be a lesson to all of us: this fund manager has used up all the luck. Let’s not get carried away with our self-reinforced sense of intelligence, because sometimes the scales of investing can start to tilt in the wrong direction very quickly.

So let’s move forward with common sense. Who needs luck anyway. 

If you have you any questions from this weeks topic, please feel free to call 03 9672 5111 or email enquiries@ascentpw.com.au

 

Kind Regards,

Mark O'Toole CFP™

Founder/Managing Director

 

 

Daniel Lunardi CFP™

Senior Financial Advisor