The podcast hosts discuss the role of luck in stock-picking. They explore how investors mistake luck for skill and highlight the risks of relying on podcast stock picks for investment strategies.
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Quick takeaways
A single stock can have a significant impact on a portfolio's performance.
Positive returns for most listed companies in 2023 should not be mistaken for skill in stock-picking.
Deep dives
Outperforming the benchmark
The podcast episode explores the performance of a portfolio of stocks picked by the hosts. By investing 10,000 rupees in 26 chosen stocks on the day their stories were published, the portfolio would have yielded 3.3 lakh rupees, outperforming the Nifty 500 benchmark, which would have grown to 3.1 lakh rupees. While one standout stock may have made a significant difference, it is not uncommon for a single stock to have a significant impact on a portfolio's performance.
The role of luck in stock picking
The podcast highlights that the year 2023 was unique, with around 90% of listed companies experiencing positive returns. The hosts caution against misconstruing luck for skill, as this anomaly could lead to overconfidence and a false sense of ability to consistently pick winning stocks. They emphasize the importance of skill and careful analysis in a bull market, illustrating this with the example of the US S&P 500, where 72% of stocks underperformed the index despite its overall rise. The podcast reassures listeners that their stock picks are based on existing trends and whispers about potential, rather than attempts to uncover hidden gems.
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The Battle Between Skill and Luck in Stock Markets