Friday, April 13, 2018

Investing and Luck

Do you have to be lucky to be a successful investor? This got me to thinking after reading a small article by Charlie Munger. Charlie of course is Warren Buffett's right hand man and Vice Chairman of Berkshire Hathaway.

He lists luck to be just as important as hard work and persistence.

He uses his own example of the hand life has dealt him. He never wanted to be a billionaire but yet here he is just that. All he wanted was to be was independent. "I just overshot" he says.

Most people he says set goals that are just too high.

Other Factors

  • discipline
  • intelligence
  • good virtue
His partner Warren also credits a massive amount of luck in achieving his success. We won the birth lottery and nothing can change that.

My own kids moan about this fact. The don't have the same opportunities as the post war economic boom generation had.

Good paying jobs are scarce, housing unaffordable and cost of living out of whack. We boomers really did win the lottery but lots have pissed that away too.

Should they just sit back and wait for that luck to kick in? I doubt it. They have to work harder and smarter than my generation ever did.

My son says his generation doesn't even talk about home ownership. They are the forever renter crowd in Toronto.

I don't know how you insert luck into you're investments and style, other than to buy quality stocks and stocks that have been around for decades. This will help to improve your luck and hopefully enjoy a continuing upward ride.

Buffett and Munger we will never be. We are or at least I at age 62, can't get that lucky.

One of the main reasons I tell people I retired after working for 45 full time years is that, if you haven't made enough money by then, then when, will be enough? 

How much longer after 45 years of work at 60 years old would you have to work to secure your future or have enough money? I just decided enough was enough.

So I just checked out with what I had and made adjustments that what I had financially would have to last.

People tell me all the time how luck I am. Lucky to have joined the military. Lucky to have a good pension and lucky to retire at 60.

Luck had nothing to do with any of that, it's NONSENSE!

None of my friends joined the military, were they lucky not to? They had the same opportunity. The pension, money and early retirement came with it.

I would say persistence and hard work paid off more so than luck in my life.

You do have to have a certain semblance of luck timing your investments.

Having said that, the most important part is time in the market. Call it luck if you want. Take your time building a portfolio of individual stocks or ETFs. Don't wait to get lucky buying lottery tickets.

There is always a better time to buy than others. Some stocks are cheap while others expensive. If you just pour money every month into mutual funds or ETFs then timing when you buy doesn't matter. Just get it in there.

Charlie Munger and Berkshire Hathaway buy companies when they're cheap. Munger got lucky when he met and accepted Buffett's invitation to come invest with him as a partner. That was his lucky day. Every day after that has been putting in the hard work.

Munger is 93 and still at work. I would say Berkshire Hathaway won the lottery when Munger came on board.

How has luck played a part in your investing life?

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  1. Great post from a Boomer perspective :)
    I agree that hard work, discipline, calculated risk taking, and a touch of luck are important for success. I'm more of a 'no excuses' type of millennial- I think otherwise people are just playing 'the victim'.

    Went to see Charlie Munger at the Daily Journal Corp AGM and it was amazing. He is so articulate and at 94 (he turned 94 this year I think on January 1) he is still mentally very sharp.

    1. Thanks Gen, yes Charlie is amazing. I was just surprised they put so much stock in luck helping them where they are today. Thanks for dropping by:)

  2. I feel extremely lucky because until I came across an article by Tom Connolly we were floundering, buying & selling, taking bad advice, following the trend and listening to Fin Advisors. It really was luck because I was scrolling the internet reading various investment articles and saw this:
    "If a company does not pay a dividend, don't buy it. If they don't grow the dividend don't buy it either."
    I checked our own holdings and saw that half paid dividends but only 15% grew their dividend. Then I saw that the 15% were our better holdings, and that lead us to our path to a successful retirement.

    1. I first heard that from Kevin O'Leary back in the day when he was on Squeeze Play. "If it doesn't pay Daddy, I don't own it". Since I heard that I only buy stocks that pay a dividend. I do what I can with what little I have. Dividends rule and you have to have a little bit of luck on your side.


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