Is It LUCK or Is It SKILL or Is It Just the MARKET?

Is it Luck or Is it skill or is it just the market? The markets are in fine fettle for now, what with new highs and all. Everyone is feeling cheery- everyone who has put money into the market that is. Those that didn’t, for whatever reasons, are beginning to regret it as this market seems to be defying all their “reasons” for halting its stride. And for those that were bearish, they are left licking their wounds month after month and several of them are now turning shades, particularly after the UP election! They are now becoming the new converts to the bullish theme.

In the meanwhile, those that have been in the market and active at that are feeling good. About their portfolios and indeed, about themselves too! Suddenly, there is a feeling that I can do it too! I met quite a few traders-turned-money managers who say that they have been doing well over the last ‘few months’. This is the situation for a lot of traders as well. Many times this is enough to render an illusion that one has actually got it now- the way to beat the market and keep earning money! After all, their trades are making money and their investments, oh boy, are they crackling! I really know how to pick them now, they are telling themselves.

So, is it that many have suddenly discovered skills that they did not know they possessed? Or have they ironed out behavioral faults that used to come in the way of making profits before? Or perhaps, their sources are now better, their network now a lot more solid? I wonder who is thinking I have been very lucky to get into some good winners and pick a few stocks that rose smartly in a short time! Not many I would wager. After all, one of the biggest errors of human beings to overestimate their own ability to do something better than most others! More, who is thinking that perhaps, it is all the market’s doing? The trend has been running smoothly for 3 months now and that is good enough time for it to gloss over most of the errors that we make!
My take would be that it is a bit of everything, with your personal skills being the smallest contributor! The biggest factor is the superb trend of the last three months and that always enables our trades, making the job look easier than it is, glossing over our mistakes by pushing stocks up beyond our error points and giving us a feeling that we are actually good at what we are doing! And then, there is a factor of luck. Where skills are quite suspect (as in the market) and varied, it is very possible that the skill factor of buyers and sellers cancel each other out and luck as a factor then dominates (this theory according to Jason Zweig).

So lets all be thankful to the good Lord that He has made this possible combination of things happen to give us some profits! Lets take that as it is and not add attributes to it, particularly of a personal nature! We are seldom as smart as we think we are!