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Does Luck Play in to Choosing Stocks?

Does Luck Have Anything to Do With Picking Stocks?

Some people avoid certain types of investments because they compare investing to gambling and don't want to take risks with their money. In the book A Random Walk Down Wall Street Burton Malkiel, the author and Princeton Professor, theorized that "a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts." In other words, he thought picking stocks was all about luck.

When you pick companies and buy their specific stocks, you’re essentially betting on the companies to perform a certain way. Sure you can try and factor in a company’s track record, but past performance certainly doesn’t predict the way a stock will perform in the future. On the other hand, stock analysts have their jobs for a reason. Do you think people who succeed in the stock market are relying on luck?

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Join The Conversation
indielove indielove 9 years
The market can be volatile, you never know what might happen. You have to have a keen eye for change in the right and the wrong direction.
MandyJoBo MandyJoBo 9 years
Both. If you're picking an up-and-coming company, it's a crap shoot for you. If you are doing the top 100, then it's just about letting it ride.
mayara mayara 9 years
It's not all luck, but the market does depend on the behavior (including the irrational) of people, who are all, when you get right down to it, stupid monkeys at least part of the time. So, while research can change your odds, luck is still part of the equation.
princessjaslew princessjaslew 9 years
I think there's a combination of skill and luck. I know I don't have the skills for it mainly because I don't really bother to research the companies. So buying stocks for me would probably not be a good idea. When I signed up with sharebuilders a year ago, I ended up buying Starbucks (mainly 'cos I was buying coffee from them everyday) and two other stocks that sharebuilders recommended. i'm really regretting it now esp since I seem to have lost money on them. But then again, until I sell them, I haven't really made a loss...yet. but buying stocks is a combination of both skill and luck. luck because no one can make predictions of the future much as we want to. skill because you need to make a calculated risk based on available information.
cageyme cageyme 9 years
I once heard Peter Lynch speak at a conference. He said that you should never buy what you don't know. In other words, do your research. However, he also said that with all his knowledge, skill, and years of experience, he was still wrong as much as he was right. So luck, or rather uncertainty, is still a player in the process. :pepino:
Shopaholichunny Shopaholichunny 9 years
Alot of it is luck but you also have to do your research on which companies you want to choose.
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