St. Patrick's Day

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“Luck is the matter of Preparation meeting Opportunity “ – author Unknown

We are a few days away from St. Patrick's Day.  It’s a day we can all act Irish even if we are not.  Besides its religious roots--the feast of St. Patrick of Ireland, the day also has many unofficial themes and symbols, from Leprechauns and pots of gold to green beers and rivers.  One of the most prominent themes associated with St. Patty's Day, as well as Ireland in general, is Luck.  We've all heard the phrase, "the luck of the Irish" or some other iteration of the same adage, but can we really say that the Irish are intrinsically luckier?  Probably not.  Most successful individuals create their own luck, by, as the saying goes,” pairing preparation with opportunity” and, sadly for me and so many others, both of those ingredients don't have a lot to do with having Irish ancestors, but let’s relate this back to investing strategy. 

   Just how much of success in the stock market is based on blind luck, and what is based on skill and knowledge.  Going back to our formula for luck, preparation especially can definitely go a long, long way toward achieving your investment goals, as research of your numerous investment options will obviously aid you in picking the best balance of risk and reward for your goals and future.  But, at the end of the day, no matter how much research you do and how well this or that projection says your stocks will perform, there really is no way of knowing for sure what the future will hold.  Past numbers have no effect on the future, and the unforgiving invisible hand of the market doesn't really care how much research you've done.  So, the obvious answer is yes, luck is a huge aspect of successful investing, particularly in the stock trade.   

Michael Mauboussin, author of The Success Equation, said in an interview with Forbes that "one of the best ways to determine if an activity is pure skill or requires luck is to attempt to fail on purpose." The example he uses is that of a stock portfolio.  If an investor was asked to build a diverse portfolio built of shares of at least 20 different public companies that would perform well above the benchmark, he/she would find it very difficult.  However, if asked to do the same, except the portfolio should fall instead far below the benchmark, the investor would find it just as difficult.  In Mauboussin's eyes, this shows that, although skill is involved, luck is a very crucial aspect of investing.  So, whether you're very superstitious or don't believe in luck at all, have a safe and happy St. Patrick's Day.  Maybe some of that Irish luck will rub off on you after all.