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- Luck is Part of Investing
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When you are successful, it is natural to look inside of yourself to own the success. You worked hard, sacrificed, and risked when no one else could stomach it, and your investment paid off.
While helpful, attributing your success to something you did isn’t always accurate.
During the 1-2% interest rate rage, many newbie real estate investors believed that they were geniuses. You were investing in real estate for the past ten years until most recently meant that you made money. In some cases, a lot of money. You could have bought dumps and flipped them in a few months to double your investment. Simple, you thought. You are a genius.
The danger, of course, is believing you had any skill or expertise that resulted in those vast gains.
As I’ve written about and talked about in many podcasts, like The Honeybees, the task is to understand how much of a probability any investment decision you are about to make will be successful or not.
If totally random, with no bias, if you know nothing you have somewhat of a 50% chance of being successful. It’s the same as flipping a coin. However, in many situations, such as real estate, systems, analysis, and hard work, you can increase your odds of being right to 65% or more. If you don’t use a trusted system and do the work, you sometimes have a 100% chance of losing all your money.
When your work accounts for 65% of success, the other 35% would be accounted for by plain luck. Interest rates suddenly drop. Your investment shoots up 50%. Or a new war breaks out, oil spikes, and the markets crash. Your investment is suddenly down 50%. You followed your system but still got crushed. Knowing that it is outside your control may help you understand why you need to keep or sell that investment.
Having the right system, even the one used by the honeybees helps increase your odds of survival.
But remember, even with all their systems, honeybee survival is still about 65%-70% year to year.
Bees do everything right, but a storm knocks down the tree they live in. A bear finds their hive and destroys it in February, and they all freeze.
A farmer chooses to plant a crop of clover beside their home, increasing the availability of clean, healthy food when they bloom. As a result, 95% of the hives close by survived that year. The bees got lucky.
With failure, only look at yourself. When something goes wrong, review your path, what you did, and the work you didn’t do and continue to venture forward. Don’t blame failure on bad luck, just know it is part of it. You still control the opportunity to increase the likelihood of future success.
Luck, good or bad, is part of any decision-making model.
To learn more about this or other topics, subscribe to my podcast on iTunes or wherever you get yours.
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