Little Bluey Portfolio Update – From $1,000 Into $10,000

  • The value of the Little Bluey Portfolio increases past $10,000.
  • The Little Bluey Portfolios investment returns passed the 100% mark.
  • And, we’ll look at the relationship between luck & skill in generating returns.

Returns as of 1st of January to 31st of August, 2020.

This year has presented investors great opportunities to purchase great Australian companies at great prices.

And, we may not see an opportunity like this for some time. The Little Bluey portfolio certainty benefitted from this period.

The current holdings are:

  • EML Payments
  • Woolworths
  • People Infrastructure
  • Beach Energy
  • Adairs
  • Vita Group

By luck, all stocks are currently posting positive returns, which can be a curse at the same time.

In mentioning luck. It is important to note the role luck plays in the short term, as the investor needs to understand the dual roles of luck and skill when it comes to investing.

Luck tends to dictate share prices over short periods, but skill always reveals itself over the long term.

That is why it is best to judge a fund managers performance over a three, five, or ten year period, instead of monthly. And, this applies the Little Bluey portfolio.

Additionally, in the case where a fund manager is earning superior returns within the three years, they need to articulate how their investment strategy is generating these returns, which should include the role of luck.

Michael Mauboussin was the Chief Investment Strategist at Legg Mason Capital Management, when he wrote his book titled “The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing.”

Inside, Mauboussin uses this diagram, within the book, to explain luck-skill continuum.

Source: Michael Mauboussin

The left-side involves pure luck, where you find most types of gambling. The odds are placed firmly in favour of the house, so even if you have some strategy when playing roulette, based on the probabilities, massive wins are driven by luck.  

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Disclaimer: This article represents the opinions of Mr. Parris. Mr. Parris is not a licensed investment advisor. Mr. Parris may hold either long or short positions in securities of various companies ...

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