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Winner’s Curse —  when luck overtakes skill

When we have success in our lives, we tend to attribute that success to skill or hard work. When we fail, we attribute it to bad luck. Sounds familiar?

I know I do this all the time. It is easier than admitting that there was some luck involved in our wins and a lack of skill in our losses, says Michael Mauboussin.

A key differentiator for long-term success in investing is understanding outcomes based on the role of skill versus luck. Investing is more of science combined with art, where the end outcome is a function of luck and skill. In the short term, though, luck plays a crucial role due to market timing.

During the eight months ended November, as an economy, we added, roughly, a record 76 lakh demat accounts. And all those investors experienced tremendous tailwinds in terms of market performance in the last nine months, during which the Nifty’s return stood at about 62%. More than 148 stocks in the BSE 500 delivered more than 100% returns during the period.

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