Beginner’s luck plays an important role in our day-to-day life. For example in cricket, we have seen many new cricketers giving top-class performance on their debut game only to fade into oblivion thereafter. Such experiences are also a part of the gambling world. Those who strike luck earlier play more and more till they lose it all.
This behavioral phenomenon follows us to instances of investment as well. Investors who happen to make their debut when the markets are galloping experience exhilaration due stupendous returns and may start crediting it all to their investment acumen.
What they are actually experiencing is “Beginner’s Luck” or “Being in the right place at the right time”. They must realize that such unexpected outcomes are rarely because of their skills. Beginner’s luck is nothing but the probability of having made the right call. In any population there would be some who will get it right and some who will get it wrong.
That’s the nature of probability.
Thinking Man Solution’s on “How to Avoid Beginner’s luck trap?”
Watch and wait before drawing any conclusions whether you are lucky or even unlucky the first time. Develop skills to evaluate stocks / mutual fund schemes or consult a trusted advisor. Trust over here is twofold. One of integrity and two of competency. Such an advisor would provide dispassionate advice to escape the beginner’s luck trap.