{"id":22212,"date":"2024-06-10T23:56:00","date_gmt":"2024-06-10T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=22212"},"modified":"2025-06-07T11:12:57","modified_gmt":"2025-06-07T03:12:57","slug":"game-of-chance","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2024\/06\/10\/game-of-chance\/","title":{"rendered":"Investing is a game of chance"},"content":{"rendered":"\n<p>Yes, you read correctly, Investing is a game of chance.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/06\/10\/game-of-chance\/#Most_investors_cant_beat_the_market\" >Most investors can&#8217;t beat the market<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/06\/10\/game-of-chance\/#Investors_dont_believe_the_fact\" >Investors don\u2019t believe the fact<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/06\/10\/game-of-chance\/#How_are_mutual_funds_performing\" >How are mutual funds performing?<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/06\/10\/game-of-chance\/#Place_big_bets_for_high_odds\" >Place big bets for high odds<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/06\/10\/game-of-chance\/#There_is_a_60_chance_of_stock_investing_success_in_the_long_run\" >There is a 60% chance of stock investing success in the long run<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/06\/10\/game-of-chance\/#Bets_big_when_you_have_high_confidence\" >Bets big when you have high confidence<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/06\/10\/game-of-chance\/#Possibility_vs_Risk\" >Possibility vs. Risk<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/06\/10\/game-of-chance\/#Conclusion\" >Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/06\/10\/game-of-chance\/#Related_article\" >Related article<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Most_investors_cant_beat_the_market\"><\/span>Most investors can&#8217;t beat the market<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Investors_dont_believe_the_fact\"><\/span>Investors don\u2019t believe the fact<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Why investors and advisors should avoid trying to time or beat the market? Charles Ellis think: The biggest mistake investors make is trying to beat the market. But the problem is: the probability of beating the market is too low. It is impossible for most investors, especially institutional investors, to beat the market.<\/p>\n\n\n\n<p>\u201cFiguring It Out: Sixty Years of Answering Investors\u2019 Most Important Questions\u201d (Wiley, Aug. 9) covers a wide range of issues about which Ellis has provided his expert insight over the past six decades. (It includes a 20-page chapter on stock buybacks.)<\/p>\n\n\n\n<p>A leading proponent of indexing, he is baffled, if not confounded, that so many investors \u201chonestly believe that what they should be doing is beating the market,\u201d he says.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_are_mutual_funds_performing\"><\/span>How are mutual funds performing?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In Section 4-3 of the book &#8220;<a href=\"https:\/\/www.books.com.tw\/products\/0010935641?sloc=main\" target=\"_blank\" rel=\"noreferrer noopener\">The Rules of 10 Baggers<\/a>&#8220;, pages 143-154, I mentioned the following in the discussion article on &#8220;Reason 2&#8221; of &#8220;Investment Strategy&#8221; &#8220;Active investment should be over-dispersed, it is better to invest directly in the market&#8221; content.<\/p>\n\n\n\n<p>A consistent long-term study by several well-known financial institutions:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Consistent long-term research by many institutions, including Bank of America (ticker: BAC), indicates that only 25% of equity fund managers outperform the broader market.<\/li>\n\n\n\n<li>According to the statistics of Morningstar Direct under Morningstar (ticker: MORN) in 2021, the performance of active US stock funds lagged the market by more than 85%.<\/li>\n\n\n\n<li>The latest report from S&amp;P Dow Jones Indices (ticker: SPGI) shows that more than 79% of active mutual fund managers will perform worse than the S&amp;P 500 and Dow in 2021.<\/li>\n\n\n\n<li>The S&amp;P Indices Versus Active (SPIVA) scorecard, which tracks the performance of active funds, with year 2023&#8217;s data showing that 79% of fund managers will underperform U.S. stocks in 2022, up from 42% a decade ago.<\/li>\n<\/ul>\n\n\n\n<p>John Bogle has done a lot of research himself, and also cited research from a large number of authoritative institutions and people. For example, he cited research by David Swensen, chief investment officer of the Yale University Foundation: Among the many funds like ants, only about 4% of them have outperformed after taxes and fees over the past two decades. The return rate of the market is only 0.6% higher than that of the market on average; 96% of funds underperform the market, and they lose miserably: they underperform by an average of 4.8% per year. Everyone knows that fund managers and brokerage firms have made fortunes, but few have heard of fund investors who have made fortunes.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Place_big_bets_for_high_odds\"><\/span>Place big bets for high odds<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"There_is_a_60_chance_of_stock_investing_success_in_the_long_run\"><\/span>There is a 60% chance of stock investing success in the long run<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Peter Lynch is one of the most brilliant investors of our time. He once said: &#8220;If you are good in this industry, your ideas will be correct only 6 times out of 10.&#8221;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Bets_big_when_you_have_high_confidence\"><\/span>Bets big when you have high confidence<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>George Soros Quotes. I&#8217;m only rich because I know when I&#8217;m wrong.&nbsp;<strong>It&#8217;s not whether you&#8217;re right or wrong, but how much money you make when you&#8217;re right and how much you lose when you&#8217;re wrong<\/strong>. It is much easier to put existing resources to better use, than to develop resources where they do not exist.<\/p>\n\n\n\n<p>Charlie Munger would say &#8220;You should remember that&nbsp;good&nbsp;ideas are&nbsp;rare\u2014when the odds are greatly in your favor,&nbsp;bet&nbsp;heavily.&#8221;<\/p>\n\n\n\n<p>The idea that &#8220;a few things affect the main result&#8221; applies not only to the companies in your portfolio, but also to your personal behavior as an investor, which is an important influence.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Possibility_vs_Risk\"><\/span>Possibility vs. Risk<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Charlie Munger, the Vice Chairman of Berkshire Hathaway and a long-time business partner of Warren Buffett, has spoken on the topic of gambling and investing. Buffett has said that &#8220;investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ. <\/p>\n\n\n\n<p>Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.&#8221; Munger believes that investing is a rational and disciplined process, and that it&#8217;s important to have a long-term perspective and to avoid impulsive decisions. He also warned about the dangers of speculation and gambling, stating that &#8220;speculation is most dangerous when it looks easiest.&#8221;<\/p>\n\n\n\n<p>In summary, investing in stocks is a more calculated and research-based approach to growing wealth, while gambling is a high-risk and uncertain way of trying to make a quick profit. Both Charlie Munger and Warren Buffett advocate for a long-term approach and avoiding impulsive decisions when it comes to investing.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Why is Buffett so successful in investing? There are many reasons. But he himself has repeatedly stated that temperament is the biggest key to his success. He has the ability to resist the opinions of the majority and be able to stand alone. His partner Munger admitted that most of Berkshire&#8217;s wealth was the result of a few big deals, especially when the market was bad. Buffett&#8217;s wealth is not just because he is a good investor, but because he has been a good investor since he was a child.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"184\" height=\"128\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2023\/11\/chance-1600x1200-1.jpg\" alt=\"Chance\" class=\"wp-image-22233\"\/><figcaption class=\"wp-element-caption\">credit: scientificamerican.com<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_article\"><\/span>Related article<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/06\/10\/game-of-chance\/\" target=\"_blank\" rel=\"noreferrer noopener\">Investing is a game of chance<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/06\/seeking-facts\/\">Seeking facts is the first step in investment<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/05\/17\/risk-vs-uncertainty\/\">Risk vs Uncertainty<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/04\/16\/vaguely-right-than-wrong\/\">I would rather be vaguely right than precisely wrong<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/16\/risks-investors-should-face\/\">What are the risks investors should face up to?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/10\/02\/investment-uncertainty\/\" target=\"_blank\" rel=\"noreferrer noopener\">The uncertainty in investment<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/03\/10\/investment-vs-speculation\/\">Investment vs speculation<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/02\/28\/factor-luck\/\">How big a factor does luck play in investment success?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/09\/06\/chance-of-making-mistakes\/\" target=\"_blank\" rel=\"noreferrer noopener\">Invest success depends on less chance of making mistakes<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/03\/mistakes-of-omission-and-mistakes-of-commission\/\" target=\"_blank\" rel=\"noreferrer noopener\">Mistakes of omission and mistakes of commission<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/07\/27\/survivorship-bias\/\" target=\"_blank\" rel=\"noreferrer noopener\">People believe successful investors are survivorship bias cannot succeed<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/07\/10\/sustained-investor\/\">A investor can be sustained or not? how to verify?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/12\/19\/investing-has-no-formula\/\" target=\"_blank\" rel=\"noreferrer noopener\">Investing has no formulas, but there are ways to invest successfully<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/04\/19\/successful-investors\/\" target=\"_blank\" rel=\"noreferrer noopener\">The main investment principles of successful investors are similar<\/a>&#8220;<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>There is a 60% chance of stock investing success in the long run<\/p>\n","protected":false},"author":1,"featured_media":22233,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14,737,15,36,69,538,35,245,71,70,43,779,574,11],"tags":[],"class_list":["post-22212","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-concept","category-charles-ellis","category-charlie-munger","category-concentrated-investing","category-discipline","category-george-soros","category-long-term-investing","category-mutual-fund","category-out-of-the-ordinary","category-patience","category-peter-lynch","category-risks","category-temperament","category-buffett"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/22212","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=22212"}],"version-history":[{"count":22,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/22212\/revisions"}],"predecessor-version":[{"id":36935,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/22212\/revisions\/36935"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/22233"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=22212"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=22212"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=22212"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}