Mauboussin: Understanding the Process Can Help Separate Luck and Skill in Investing

AAII editor Charles Rotblut, CFA, interviewed Michael Mauboussin, head of Global Financial Strategies at Credit Suisse, about the role of both luck and skill in investing (subscription required). According to Mauboussin, to separate skill from luck, you first have to look at the process that generates the output you are looking to achieve. In order to assess the process, you need to look at three important elements: Analytical: “having an ability to find situations in which you believe something the world doesn’t believe and in which you have a good foundation for such a belief. Behavioral: “we are all subject […]

Is It Skill, or Luck?

Are successful investors good, or just lucky? In a recent interview with Morningstar, Credit Suisse’s Michael Mauboussin says they’re luckier than you think — but still have some skill. Mauboussin, who has done extensive research into the topic of skill vs. luck, says one way to test whether any skill is involved in an activity is to see if you can lose on purpose. “If you can lose on purpose, there has to be some skill,” he says. In investing, he adds, “we know that it’s hard to create a portfolio that beats a particular benchmark, but actually given the […]

Siegel: Stocks Are Cheap

Several top strategists recently spoke at the CFA Institute Equity Research and Valuation Conference, and The Motley Fool’s Bryan Hinmon and Michael Olsen highlighted a few pieces of advice from these gurus. One was author and Wharton Profesor Jeremy Siegel, who advised that “stocks are cheap”. Siegel said stocks are trading below average historical valuations, and noted that there has never been a 20-year period where real returns on a diversified U.S. stock portfolio have been negative. Michael Mauboussin, Legg Mason’s Chief Investment Strategist, talked about the importance of figuring out what is already priced into a stock or the […]