As from April 2013 my Journey in Investing is to create Retirement Income for Life till 80 years old for two over market cycles of Bull and Bear.

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This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

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Value Investing
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Monday, 21 October 2013

Outcome bias and Luck Factor???



Just For Thinking ....




How much of your investment success is due to outcome bias and luck factor?

How can you know?


Hmm......




















Measure, then you will know.

The Luck factor is likely to run out over a large number of occurrences over a long period of time. Right?

For stock investment, we can measure Portfolio XIRR since inception over long period of time e.g. 15, 20, 30 years or more.


Portfolio = Stocks + War Chest (Cash available for investing)



XIRR is a measure of number over a period of time.

A portfolio of stocks and war chest is a definitely a large number and 15 years (2 - 3 market cycles) should be long enough for a retail investor.


XIRR is like















Older is better. No?









8 comments:

  1. Investment returns for a brief period are, of course, affected by luck. The laws of probability tell us that almost anyone can achieve phenomenal success over any given measurement period. It is the task of those evaluating a money manager to ascertain how much of their past success is due to luck and how much to skill. - Seth Klarman

    Probably, we as retail investors may want to follow the same assessment approach since we are our own money manager.

    ReplyDelete
  2. It's luck in my case.

    I don't really care how I got my money just as long it's not illegal.

    Toto, why you abandon me... Long time never kiss me liao...

    Lady luck, don't kiss this fisherman; he prefers lady skill.

    Choose me!

    I rather be lucky than smart! Me! Me!

    ReplyDelete
    Replies
    1. Have we come across sales person who believe he or she is so lucky that they just need stand at one corner and customers will come and look for them to buy?

      Delete
  3. Evidently you have not been to Geyland (good boy!) and go ask the sales girls standing at the corner:

    "How much?"

    Quickly delete this comment. I so shy now...

    LOL!

    ReplyDelete
    Replies
    1. Exactly!

      Those who believe that they are lucky to get rich from stocks by standing at the corner doing nothing will one day get screwed by Mr. Market at certain price.

      LOL!

      Delete
    2. Go Geylang. You can't delete. Now got camera. :-)

      SINGAPORE: A video showing cameras and what seems to be flashing LED lights on an overhead bridge at Geylang Lorong 16 has caught the attention of netizens online.

      Delete
  4. "i rather be lucky than smart" Of course. If being smart is all the luck you have got.
    Ha! Ha!

    ReplyDelete
  5. l wonder whether investment "luck" can be taught and learned?

    ReplyDelete

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