We've talked about luck before, how it relates to setting goals, and pointed readers to a book review of The Black Swan but (based on what we remember) we've never discussed the role of chance when it comes to investing. So here's a great piece from the insightful Epicurean Dealmaker and a quote to entice you to click through:
Investing is clearly a game that is far more complex and subject to dramatically more causal factors than tossing a coin. However, no sane person would deny that chance must play some sort of role in an investor's results. Baruch identifies a factor he calls "persistence" in a trader's superior returns. Does that mean that outcomes in sequential investing games are not independent? That winners tend to win? If so, why? Is this the result of skill, momentum, reputation, confidence?
Or are we looking at a dramatic case of survivorship bias, where the most successful (lucky) investors are the few among many that we focus on, send money to, and try to emulate simply because they have been successful? Are these wizards of finance only one or two coin tosses away from failure, ignominy, disgrace?