How to Invest With Skill
All activities are done with some combination of luck and skill. But when it comes to your money, you want to be more than just lucky.
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In his book, The Success Equation, Michael J. Mauboussin explains how events are affected by both luck and skill and how to determine the impact of each on an activity or outcome. He lays out an array of activities on what he calls a "luck versus skill continuum," a scale ranging from pure luck to pure skill. The act of investing falls very close to the pure luck end of the spectrum.
Considering though that we have some investing professionals who are clearly skilled standouts (Warren Buffett, for example), I would argue that investing is more than just a matter of luck.
In my four-part series for Kiplinger's Wealth Creation Channel, I outlined my thoughts on this matter and detailed a repeatable and disciplined process to help you find outstanding managers and investment opportunities. Check out my advice and learn how to hone your skills as an investor.
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PART ONE: Skill Versus Luck in Investing
Having a disciplined investment strategy in place can help increase your odds of success.
PART TWO: What Rate of Return Can You Expect from Your Portfolio?
Your estimate can help you figure out what asset allocation best suits your risk tolerance and financial goals.
PART THREE: How to Pick the Best Funds for Your Portfolio
Be sure to look at performance history, management experience and costs, among other things.
PART FOUR: 4 Steps to Finding the Best Funds for You
It's a big fund universe out there; here's how to narrow down your choices.
Doug Kinsey is a partner in Artifex Financial Group, a fee-only financial planning and investment management firm based in Dayton, Ohio.
