The Daily Buffett

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The Illusion of Success

October 15th

Half of all coin-flippers will win their first toss; none of those winners has an expectation of profit if he continues to play the game.

Warren Buffett

The intoxication of initial success can lead astray even the most disciplined of investors. The first win, especially in the realm of investing, might feel like a validation of skill or strategy. However, it's crucial to remember that in games of chance, such as a coin toss, initial success does not forecast future outcomes.

An early win, like a successful first investment, might lead to an illusion of competence. This can be a hazardous misconception. Continual investment without a solid understanding of the principles of investing is akin to betting on a coin toss.

Distinguishing between skill and luck is paramount. Are your successes rooted in understanding, knowledge, and a robust investment strategy, or are they the product of a transient twist of fortune? The coin does not remember its last flip. Each toss is a fresh game of chance. Your investments, however, should not be grounded in the same unpredictability.

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