Housel on the Irony of Luck

In a recent article for the Collaborative Fund, Morgan Housel contrasts luck and risk as they relate to investing, arguing “you cannot understand one without appreciating the other.” “This is the irony of investing,” writes Housel, “Risk and luck are different sides of the same coin, but we treat one as critically important, and the other like it doesn’t exist—at least for you, when you succeed.” Housel offers the following insights/comparisons: Investors should quantify both.… Read More

Luck or Skill? Focus on the Process, not Performance.

By John Reese (@guruinvestor) —  Is it better to be lucky or smart? When it comes to investing, I think we can all agree that success arises from a combination of the two, but to what degree has been the subject of much debate. Those who are well-studied in behavioral finance would tell you that investing is rife with the illusion of skill—an investor’s inflated, misplaced confidence in their own abilities to choose winning stocks.… Read More

Housel Says Investing is Also an Art Form

A provocative article penned by Collaborate Fund’s Morgan Housel describes how investing, like many fields, embodies both art and science. “Investing,” he writes, “is maybe 60% science, the rest art.” Some investors, he argues, “obsess over brand and intangibles. Others say ignore those and only look at fundamentals. Neither is right or wrong.” Housel uses the example of Warren Buffett’s investment in Coca Cola, in which there were favorable fundamentals as well as the immeasurable… Read More

Greenblatt Weighs in on Active Management

“Most people have a tough time sticking with active managers who underperform for a period of time. But of course, if you’re going to beat the market, you have to do something different than the market. And active managers will zig and zag differently,” explains Joel Greenblatt, founder of Gotham Asset Management, in a recent interview with Morningstar. Greenblatt discusses his firm’s disciplined valuation process that uses both absolute and relative value metrics to rank… Read More

Evaluating Portfolio Managers: The Luck Factor

We are constantly singing the praises of examining fundamentals when choosing stocks, but a similar process applies when evaluating the performance of portfolio managers,  says Jacques Lussier, CFA and CEO of Ipsol Capital. In a recent Take 15 interview for Enterprising Investor, Lussier shares his insights about the value of “factor-based benchmarks” when distinguishing effective managers from lucky ones. “Some managers,” says Lussier, “have good performance because they have good process” but some show well… Read More