Tuesday, April 26, 2005

It is too easy to mistake chance for talent.

I like buying stocks. I have never lost money on a stock, and I have an 86% return over the last 6 years vs a loss of 20% for the S&P and a loss of 6% for the Wilshire 5000 over the same time period.

I have solidly done what most professionals haven't. I have beaten the market over time. Needless to say it isn't even close.

But how much of that is luck. I'm sure most of it.

I wanted to buy charter at 15. They are now at $1.28. I wanted to buy AIG. They were in the high 60s, now they are at 50, and announcing accounting problems. I bought Iomega thinking they were going to revolutionize computers. I doubled my money and sold because I was unemployed. I did not want to sell, and if I hadn't sold I would have lost my money. I wanted to buy Netzero. I naively thought they were going to change the internet landscape. They don't even trade anymore...they got bought out by the company that owns Juno (remember Juno!?)

So where am I going with all of this? I am driven by a fear that someone is going to discover that I am lucky. I went to grad school and I'm taking the CFA charter. Why? Because I want to learn. I'm scared that I am just lucky. I could have easily lost my ass if I had done any of the above trades. Instead I picked all solid winners. What kept me from buying the losers? Why did I not buy Charter or AIG. I thought they were no-brainers.

Is it luck or is it skill? I'm afraid of the answer.


Anonymous Anonymous said...

I'm not saying you lack skills by any means in the stock game but sometime's it's better to be lucky than good! I'd rather be lucky and win powerball using autopick than being good at picking random numbers and losing. (not an analogy to the stockmarket by the way, just hope autopick makes a winner out of me)


Thu Apr 28, 07:53:00 PM EDT  

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